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HMRC internal manual

International Manual

Controlled Foreign Companies: legislation - introduction and outline: Chargeable profits and creditable tax

Chargeable profits and creditable tax

Where a controlled foreign company is unable to satisfy any of the exclusions and an apportionment under Chapter IV is due, a computation of the controlled foreign company’s chargeable profits and creditable tax (tax paid locally) for the accounting period must be made. Chargeable profits do not include chargeable gains but are otherwise computed in broadly the same way as profits would be computed for Corporation Tax purposes if the company were resident in the United Kingdom. However, some modifications to the normal Corporation Tax rules are necessary because controlled foreign companies are not in fact resident here. Guidance on the computation of chargeable profits is in INTM255600.

The creditable tax of a controlled foreign company consists of:

  • any foreign tax suffered on its income which would be eligible for double taxation relief if it were resident in the United Kingdom, plus
  • any Income or Corporation Tax which it has paid either by deduction at source or on assessment (for example, on the profits of a branch in the UK).

See INTM255830.