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HMRC internal manual

International Manual

Controlled Foreign Companies: The CFC Charge Gateway Chapter 5 - Non-trading finance profits: UK Activities: Example of a third party acquisition with an existing overseas financing company

A UK Group acquires a much smaller US group active in the same sector. The US group has an existing intra-group financing and holding company resident in Luxembourg through which its main investments in non-US interests are held. The Luxembourg resident company holds long-term structural loan receivables made to non-US companies (but none to UK resident companies). The creation and on-going management of the risk on these loans was carried out by US Group Treasury whilst staff in Luxembourg carry out the day-to-day administration of the loans.

On acquisition of the US group, there will be no UK significant people functions (SPFs) in respect of the activities of the Luxembourg CFC because at that point in time there is no activity that represents an SPF other than the SPFs previously undertaken by US Group Treasury. This may change however as normally a group will want to streamline operations and centralise the management of the acquired group and this may include coordinating and centralising Group Treasury functions. And so, even if the US Treasury function remains in the US in the enlarged group and intra-group loans continue to be financed from the Luxembourg CFC, it will be important to review where SPFs are now carried on with regard to the repayment or refinancing of existing loans and the creation of any new ones.