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HMRC internal manual

International Manual

Controlled Foreign Companies: Entity Exemptions: contents

The profits of a CFC are exempt from the CFC charge if any one of five entity-level exemptions applies.

INTM224100 - Chapter 10 - Exempt Period Exemption

The Exemption Period Exemption provides an entity-level exemption for CFCs that have come under UK control for the first time. The period of exemption is temporary, usually 12 months.

INTM224700 - Chapter 11 - Excluded Territorities Exemption

The Excluded Territories Exemption provides an entity-level exemption for CFCs that are tax resident in certain territories.

INTM225500 - Chapter 12 - The Low Profits Exemption

The low profits exemption provides an entity-level exemption for CFCs with low levels of profits in an accounting period.

INTM225700 - Chapter 13 - Low Profit Margin Exemption

The low profit margin exemption is an entity-level exemption aimed at those CFCs that perform substantial (in terms of volume) but relatively low value added functions outside the UK such as:

  • back-office functions,
  • local marketing and distribution operations,
  • toll manufacturing, or
  • call or data-processing centres.

INTM226000 - Chapter 14 - The Tax Exemption

The purpose of this entity level exemption is to easily exclude a CFC from having to apply the CFC rules to its profits when it pays a normal to high level of tax in its territory of residence.