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HMRC internal manual

International Manual

HM Revenue & Customs
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Controlled Foreign Companies: Entity Exemptions: Chapter 11 - The Excluded Territories Exemption: Meaning of accounting profits: Restricted income - Category C

TIOPA10/S371KH sets out the scope of Category C income. This category covers income accruing to a trust of which the CFC is either a beneficiary or settlor (as added to the measure of accounting profits of a CFC at TIOPA10/S371VD(4)(a)). It also covers amounts sheltered in partnership interests held by the CFC where the amounts sheltered would not normally be included in the CFC’s accounting profits because the partnership is not treated as transparent for accountancy purposes. This category of income is restricted in order to prevent the accounting profits measure of income being abused by the use of trusts or partnerships to shelter significant amounts of non-trading finance income.