HMRC internal manual

International Manual

INTM254650 - Controlled Foreign Companies: exemptions - Acceptable Distribution Policy ('ADP'): Definition of net chargeable profits

The ADP exemption was abolished in FA09 for accounting periods of CFCs beginning on or after 1 July 2009. This guidance only applies to APs ending on or before 30 June 2009


The net chargeable profits are the chargeable profits for the period less the company’s unrestricted creditable tax. See INTM209020 for further discussion of chargeable profits. The unrestricted creditable tax is the creditable tax that would be due if an apportionment were due for that period (INTM255850) but without applying the restriction in ICTA88/S797 which limits creditable tax to the corporation tax due on the chargeable profits.

The effect of allowing unrestricted creditable tax is that, in computing the creditable tax, no grossing up of dividends for underlying tax or withholding tax is required. The tax shown as paid in the controlled foreign company’s accounts can be accepted as a proper deduction in arriving at net chargeable profits.