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HMRC internal manual

Tonnage Tax Manual

The ring fence: Controlled foreign companies

CFC is an ‘overseas shipping company’

Background – the normal rules

The normal rules for controlled foreign companies (CFCs) may impose liability to tax on a UK company if:

  • it has an interest in a CFC, and
  • that CFC does not make a reasonable distribution out of the profits of any particular accounting period.

The normal rules are disapplied (byFA00/SCH22/PARA54) in certain circumstances.

Overseas shipping companies within paragraph 49

In particular, a tonnage tax company is not subject to any liability under the CFC legislation in any accounting period in respect of the profits of a CFC, if in that period any distributions received by the company from that CFC would have been ‘relevant shipping income’.

Distributions from an overseas subsidiary will be relevant shipping income if it is an overseas shipping company and the conditions of FA00/SCH22/PARA 49(2) are satisfied, see TTM06400.

By definition, an ‘overseas shipping company’ will not have any other profits that are not relevant shipping profits, although there is a de minimis exclusion, see TTM06420.


FA00/SCH22/PARA54(1) (profits of controlled foreign companies) TTM17311
Outline of controlled foreign companies TTM07100