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HMRC internal manual

International Manual

Controlled Foreign Companies: exemptions - Acceptable Distribution Policy ('ADP'): Non-resident shareholders: indirect interests

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


An adjustment may be necessary to the fraction used to establish the ‘appropriate portion’ of net chargeable profits for the purposes of INTM254710 where United Kingdom residents have an indirect interest in a controlled foreign company. An indirect interest will exist where the United Kingdom residents hold an interest in a non-resident company which in turn holds shares in a controlled foreign company. Where necessary, the numerator of the fraction is reduced to reflect both the United Kingdom residents’ interests in the intermediate non-resident company and that company’s shareholding in the controlled foreign company.


United Kingdom residents hold 60 and non-residents hold 40 of the 100 issued shares in a non-resident company A which in turn holds 90% of the single class of issued shares of controlled foreign company B. The numerator of the fraction by which available or net chargeable profits are multiplied is reduced to:

(60% x 90%)/100 = 54

so that the adequacy of a dividend treated as paid by the controlled foreign company to United Kingdom residents is measured against 54% of the company’s net chargeable profits.