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HMRC internal manual

International Manual

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HM Revenue & Customs
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Controlled Foreign Companies: Apportionment of a CFC’s Chargeable Profits and Creditable Tax: Variable Shareholdings

TIOPA/S371QF applies to determine the percentage of issued ordinary shares that R’s relevant interest represents where that percentage holding varies during the accounting period. The relevant interest is the sum of the relevant percentages for each holding period. For example, if during the accounting period the amount of R’s relevant interest changes three times, then the overall relevant interest for the accounting period is found by adding together the relevant percentage calculated for each of the three holding periods.

This is given by the formula (P x H)/A where:

P is the percentage of ordinary shares held (based on the formula P x S in INTM233400) for each period in which the shareholding remained the same during the CFC’s accounting period;

H is the number of days for which the shareholding remained the same - the ‘holding period’;

A is the number of days in the accounting period of the CFC.

Example - variable shareholdings

Company A holds 60% of the CFC’s issued ordinary shares as a relevant interest during the first 100 days of the accounting period and 80% during the remaining 265 days of the accounting period.

The percentage of the CFC’s issued share capital that A’s relevant interest represents in the accounting period is the sum of the relevant percentages for the two holding periods:

Holding period 1: relevant percentage is 60% x 100/365 = 16.4%,

Holding period 2: relevant percentage is 80% x 265/365 = 58.1%.

Thus the percentage of the CFC’s issued share capital that A’s relevant interest represents in the accounting period is 16.4% plus 58.1%, which is 74.5%.