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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 - transfer of an asset in consideration for the cancellation of a liability


A UK resident company contributes a loan receivable (which is a loan to a German group company) to a financing CFC in return for the cancellation of a debt due from the UK resident company to the financing CFC. Non-trading finance profits arising on the loan to the German group company will pass through the Chapter 5 charge gateway as the loan receivable is an asset that is received by the CFC from a UK connected company in return for a cancellation of the UK connected company’s liability to the financing CFC. This asset transfer will fall within TIOPA10/S371EC(4)(d)) as it does not fall within TIOPA10/S371EC(4)(a) to (c) or either of the exclusions in TIOPA10/S371EC(5), i.e. the asset is not received in exchange for goods or services provided by the CFC or received by way of a loan from the UK.