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HMRC internal manual

International Manual

Controlled Foreign Companies: apportionment of chargeable profits and creditable tax: Interests in a controlled foreign company

Where an apportionment falls to be made the controlled foreign company’s chargeable profits and creditable tax are apportioned among the persons who had an ‘interest’ in the company at any time during the accounting period in question. ICTA88/S749B(1)(a) specifies the circumstances in which a person has such an interest. In many cases the only interest needing to be considered will be shareholdings. However there are other ways in which a person may effectively control or derive benefit from a company: for example, through special rights in a winding up or through contingent rights. The definition of persons with an interest in a controlled foreign company has therefore been drawn widely.

Persons Having an Interest in a Controlled Foreign Company


For the purposes of the controlled foreign company provisions, the following persons have an interest in a controlled foreign company:

  1. any person who possesses, or is entitled to acquire, share capital or voting rights in the company
  2. any person who possesses, or is entitled to acquire, a right to receive or participate in distributions of the company
  3. any person who is entitled to secure that income or assets (whether present or future) of the company will be applied directly or indirectly for his benefit, and
  4. any other person who, either alone or together with others, has control of the company.

Loan creditors are not treated as having an interest in a controlled foreign company although a company can be a controlled foreign company by virtue of control by a loan creditor under CTA10/S453 (previously ICTA88/S416).

The definition of a ‘distribution’ for the purposes of (b) above is the definition in CTA10/S1000 but without any of the limitations in that provision which restricts its application to distributions made by United Kingdom resident companies.