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HMRC internal manual

International Manual

Controlled Foreign Companies: The CFC Charge Gateway Chapter 5 - Non-trading finance profits: Capital investment from the UK: Example of capital investment from the UK - loans out of profits previously subject to an apportionment


A CFC carrying on captive insurance business in the accounting period ended 31 December 2014 has 75% of its premium and investment profits pass through the CFC charge gateway by way of Chapter 7 and then apportioned and charged on a UK chargeable company under step 5 of TIOPA10/S371BC(1). So if the CFC uses 60% of its profits from the accounting period ended 31 December 2014 to make loans of £100m to other CFCs and votes a dividend of an amount equal to the 40% balance of the profits made in that accounting period, then 75% of the loans (£75m) will be treated as being sourced from UK capital investment, on a pro-rata basis. It is very unlikely that local company law will allow the CFC to specify that the dividend was paid wholly out of profits that were subject to an apportionment to the UK parent company.