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HMRC internal manual

International Manual

From
HM Revenue & Customs
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Controlled Foreign Companies: Residence of CFCs: Residence in more than one territory

The general rule at TIOPA10/S371TB(1) may result in a CFC being regarded as resident in more than one territory. For example, a company may be liable to tax in one territory because it is incorporated there and in another because it is managed there.

In order to determine which is the territory of residence for CFC purposes the rules in TIOPA10/S371TB (3) to (9) must be applied. Where more than one of the following rules applies to determine the residence of the CFC, the earliest takes precedence:

  1. Where an election or designation of residence has been made for an earlier accounting period of the CFC in respect of one of the eligible territories, that is the territory of residence (TIOPA10/S 371TB(4));
  2. Where the CFC’s place of effective management is carried on in one (and only one) of the eligible territories then that is the territory of residence (TIOPA10/S371TB(5));
  3. Where the CFC’s place of effective management is carried on in two or more of the eligible territories, the territory in which more than 50% of the CFC’s assets are held (priced at their market value immediately before the end of the CFC’s accounting period) is the territory of residence (TIOPA10/S371TB(6));
  4. Where a CFC is resident in more than one territory but (c) above doesn’t apply because none of the eligible territories in which effective management is undertaken hold a majority of the CFC’s assets, then any other eligible territory in which more than 50% of the CFC’s assets are held (priced at their market value immediately before the end of the CFC’s accounting period) is the territory of residence (TIOPA/S371TB(7));
  5. If an election is made by certain UK resident companies in accordance with TIOPA10/S371TC(1) specifying an eligible territory, then that is the territory of residence (TIOPA10/S371TB(8)); or
  6. If an officer of HMRC designates a territory on a just and reasonable basis in accordance with TIOPA10/S371TC(6) to (8), then that is the territory of residence (TIOPA10/371TB(9).