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HMRC internal manual

International Manual

Controlled Foreign Companies: Creditable tax of a CFC: Example

X is a CFC registered in Jersey and as such pays no local corporation tax. It operates through permanent establishments in the UK and France. For the year to 31 March, when the UK rate of corporation tax is 24%, it makes profits of £10,000 in each of its PEs and pays UK and French corporation tax of £2,400 and £3,400 respectively. X also has investment income of £100,000 - most of this bears no tax anywhere but interest of £5,000 from a UK company has income tax of £1,000 deducted at source.

The creditable tax of X is computed as follows:

French corporation tax (restricted to the UK tax attributable  
to the French permanent establishment income) 2,400
UK corporation tax on PE income 2,400
UK income tax deducted from interest 1,000