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HMRC internal manual

International Manual

Controlled Foreign Companies: How the corporate tax regime works for CFCs: When to make a return in respect of a CFC

A United Kingdom resident company with a relevant interest in a CFC does not need to make a return in respect of a CFC if:

  • the CFC satisfies: the Tax Exemption; the Excluded Territories Exemption; the Low Profit Margin Exemption, or 
  • the relevant interest, together with the interests of connected or associated persons, is less than 25% at all times during the accounting period.

Interests in all other CFCs should be included on the supplementary pages. This relaxation does not apply to disclosure reference numbers under FA04/S313 (Disclosure of Tax Avoidance Schemes) which must be included on the supplementary return CT600J.

The following should be consulted in deciding whether a return is necessary:

Overview of the CFC rules INTM191000
Control INTM236000
Relevant interests in a CFC INTM227000
Entity Exemptions INTM224000
Connected Persons INTM248350



The United Kingdom interest holder may (without prejudice) include on the supplementary pages any company in which it is unsure if it has an assessable interest or for which it is unsure if it falls within the definition of a CFC. For example it is possible that some United Kingdom companies with an investment in an open ended investment company may not always be certain if they have an assessable interest (i.e. more than 25%) in a CFC, or indeed whether that investment company is controlled from the United Kingdom, because the investment company’s share capital expands and contracts as investment changes. If none of the exemptions apply, and the company is unsure if it has an assessable interest CSTD Business, Assets & International Base Protection Policy team will advise on whether and how the company should complete the CFC supplementary pages.



It is recognised that, in determining whether a CFC satisfies all of the conditions of the objective exemptions, there may be occasions where information about the CFC may not be readily available or the time it would take to verify beyond any doubt that the CFC satisfies all relevant conditions would be disproportionate.

In such circumstances, it would be reasonable for the self assessment to be based on a realistic interpretation of the available information. It remains a question of fact whether a CFC qualifies for one or more of the exemptions and companies remain responsible for ensuring that their returns are correct and complete. Whilst HMRC will continue to enquire into returns as appropriate according to established risk assessment processes, so long as the self assessment is reasonable in the circumstances, there will be no question of any penalty even if the interpretation turns out to have been incorrect. Customer Compliance Managers and Officers responsible for a group’s tax affairs are available to advise on the best way of reducing the risk of an enquiry.