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HMRC internal manual

International Manual

Controlled Foreign companies: Entity Exemptions: Chapter 10 - The Exempt Period Exemption: Amendment of company tax returns

Amendment of company tax returns in relation to the exempt period exemption is dealt with at TIOPA10/S371JG. This section extends the amendment time limit of any corporate tax return period which falls, wholly or partly, in a CFC’s exempt period. This is necessary because whether any chargeable profits arise to that CFC for that period can only be ascertained once the CFC’s position for the subsequent period is established.

Extending the amendment date

The effect of the section is to extend the amendment date for any chargeable company’s accounting period which includes any part of the exempt period to match the corporation tax return amendment date for the accounting period in which the CFC’s subsequent period ends. The rationale for this is illustrated by the following example.


Company X becomes a CFC on 1 Jan 2013 and the following facts are relevant:

  • Its accounting periods run to 30 June each year, as do the accounting periods of its UK parent.
  • The potentially exempt period is 1 Jan 2013 - 31 Dec 2013.
  • The testing period is the first full accounting period after the end of the exempt period, which is the year ended 30 June 2015.

The relevant returns of UK parent are:

Period ended 30 June 2013 X potentially fully exempt  
Period ended 30 June 2014 X potentially partially exempt to 31 Dec 2013  
Period ended 30 June 2015 X testing period/subsequent period  

The normal time limit for amending a company tax return is 12 months after the filing date - the filing date is 12 months after the end of the accounting period. 

Return period ends Filing Date Amendment time limit  
30 June 2013 30 June 2014 30 June 2015  
30 June 2014 30 June 2015 30 June 2016  
30 June 2015 30 June 2016 30 June 2017  

Whether X is actually exempt for the accounting period ended 30 June 2013 will depend on whether X is exempt in the period ended 30 June 2015. The time limit for amending the UK return for the period ended 30 June 2013 is 30 June 2015. In practice this would mean that it is not possible to amend the return for the potentially exempt period(s) by reference to the CFC status of X in the later subsequent period.

However TIOPA10/S371JG applies to extend the time limit for amending returns in relation to exempt periods. It applies to the UK returns of companies with a relevant interest in X, and covers any UK returns which include any part of a potentially exempt period for X. So the amendment time limit for the two return periods ended 30 June 2013 and 30 June 2014 will match the amendment time limit for the accounting period that the subsequent period ends in - in this case the UK return for the period ended 30 June 2015. This would mean a revised amendment time limit of 30 June 2017.

Amendments under the extended time limits are limited to amendments in relation to the application of the exemption including any consequential amendments related to the CFC charge - for example a revised capital allowances claim. In other words, the UK potentially chargeable company is able to amend its return both to reflect any CFC charge, and to reduce that CFC charge by reference to available allowances and deductions.

In the event that the potentially exempt period is extended by reference to TIOPA10/S371JD(3), the extended time limit requirement also covers any further UK return periods that include any part of the extended exempt period.

The extension to the time limit does not apply to any UK company which has a relevant interest in a CFC (company X in the above example) during the subsequent period, but did not have any such interest in the exempt period. The practical reason for this limitation is that it should prevent the circumstance that one UK company makes a return which includes the potentially exempt period, but that the return for the subsequent period is made by a different UK company. In such circumstances, an extended time limit would result in the amendment time limit of one UK company being determined by reference to the normal amendment time limit of another UK company, which may or may not be related or connected to the first UK company, and may or may not have the same accounting date.