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HMRC internal manual

International Manual

HM Revenue & Customs
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Controlled Foreign Companies: exemptions - the motive test: The transaction leg of the motive test: statutory definition


To determine whether the facts fit the statutory definition, three questions need to be answered:

  1. are the results of the transaction(s) reflected in the controlled foreign company’s profits for an accounting period?


  1. have those transaction(s) achieved a reduction in United Kingdom tax?


Only if the answer to a l l of the above three questions is yes, will a transaction achieve a more than minimal reduction in United Kingdom tax. If the answer to any of the questions is no, the transaction leg will not be in point and there will be no need to consider the second (motive) element.