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HMRC internal manual

International Manual

HM Revenue & Customs
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Controlled Foreign Companies: Computation of Chargeable Profits and Creditable Tax: Place of trade


Although an overseas company is assumed to be United Kingdom resident, there is no corresponding assumption that it carries on any of its activities in the UK other than those which are in fact carried on in the UK. The company’s income from a trade carried on wholly outside the UK will therefore be chargeable as foreign income, though the amount of trading income will be computed in accordance with the trading income rules.

The consequences of assumed residence in the UK, in relation to foreign income, include the following:

  • The company is entitled to credit for (that is, can treat as ‘creditable tax’) foreign taxes paid in respect of its income in accordance with the normal double taxation relief rules (TIOPA10/S26 - S30).
  • A trading company’s chargeable profits will be computed as though the trade commenced at the time when its assumed residence in the UK began, and ceased when the assumed residence ceased (CTA09/S41(2)).
  • Trading losses will not be eligible for set off against the company’s other income or for carry back under CTA10/S37, CTA10/S44).
  • The foreign company is brought within the transfer pricing legislation at TIOPA10/Part 4 (previously ICTA88/SCH28AA).