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HMRC internal manual

International Manual

Controlled Foreign Companies: Assumed Taxable Total Profits, Assumed Total Profits and the Corporation Tax Assumptions: Close Company

One of the corporation tax assumptions is that the CFC is assumed not to be a close company. The cost of benefits provided by the CFC to a participator cannot therefore be treated as a distribution in accordance with CTA10/S1064 and the cost of providing such benefits cannot be disallowed as a deduction in computing assumed taxable total profits. The deduction may however be disallowable in accordance with CTA09/S54 (expenses not wholly and exclusively for the purposes of the trade).