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HMRC internal manual

International Manual

HM Revenue & Customs
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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: Earlier contribution by the UK parent - interest profits

An offshore holding company received £1bn of capital funding from its UK parent in 2011 and then used that £1bn to subscribe for shares in a new financing CFC which lent the funds on to another overseas group company.

The financing CFC paid £50m of profits back to the holding company as dividends in 2013 and the holding company used the £50m to subscribe for shares in another newly formed financing CFC.

In these circumstances the £50m can be said to derive from the capital funding contributed by the UK parent in 2011 as the dividends can only have been generated by that capital investment (with a small adjustment for any local profit made from administering the intra-group loan).