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HMRC internal manual

International Manual

Controlled Foreign Companies: apportionment of chargeable profits and creditable tax: Determination of apportionment by the Commissioners of HM Revenue & Customs


Where an apportionment falls to be made under ICTA88/S747(4) (interests held other than by virtue of ordinary shares alone) and a return is made or amended using a particular basis adopted by the company the Commissioners of HM Revenue & Customs may determine another basis to be used for the apportionment. In other words, HMRC may determine that a different ‘just and reasonable’ basis be used to apportion profits than the basis used by the company in its self assessment. There are two reasons for this:

  • first, to ensure that where there is more than one interest holder in a controlled foreign company they all use the same just and reasonable basis, otherwise profits might fall out of account or be double taxed;
  • secondly, to ensure that different just and reasonable bases are not used from year to year for avoidance reasons.

The Commissioners may by notice require the company making the return to produce such documents in the company’s power or possession and to provide them with information in such a form as may reasonably be required to determine the basis for making the apportionment. The provisions in FA98/SCH18/PARA27 (INTM256670) apply to such a notice.

Once a determination under this section has been made by the Commissioners that basis of apportionment shall be treated as the only basis of apportionment allowed.

A determination of apportionment may be the subject of an appeal against an amendment of the return but only on the basis that the basis of apportionment adopted by the Commissioners is not just and reasonable.