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HMRC internal manual

International Manual

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Controlled Foreign Companies: exemptions - the motive test: The transaction leg of the motive test: transactions reducing United Kingdom tax

ICTA88/S748(3)(a) and ICTA88/SCH25/PARA16 - PARA18

There are two separate and distinct elements to the first leg of the motive test (the second of which is only relevant if the first element is in point):

  • a statutory definition in ICTA88/SCH25/PARA16 and ICTA88/SCH25/PARA 17 of what is meant by the results of transaction(s) reflected in the controlled foreign company’s profits for an accounting period achieving a more than minimal reduction in United Kingdom tax;

and

  • a motive element in section ICTA88/S748(3)(a) (and ICTA88/SCH25/PARA18) to establish whether the main purpose, or one of the main purposes, of the transaction(s) was to achieve that more than minimal reduction in United Kingdom tax.