CFC rules—definitions of company and accounting period
CFC rules—definitions of company and accounting period

The following Tax guidance note provides comprehensive and up to date legal information covering:

  • CFC rules—definitions of company and accounting period
  • Meaning of company in the CFC context
  • What is an accounting period for CFC purposes?

This Practice Note deals with the new controlled foreign company (CFC) rules that apply for accounting periods of CFCs commencing on or after 1 January 2013. For a Practice Note on similar subjects under the rules that applied until then, see: Old CFC rules—definition of a CFC: company, accounting period and lower level of taxation. The differences between the old and new rules for these definitions are explained below.

The definition of company determines what entities can be CFCs and the definition of an accounting period determines the period over which a CFC charge can arise and other measures are tested. As a result they are important concepts to understand.

Meaning of company in the CFC context

Other than in respect of cell companies, as explained below, 'company' in a CFC context has the broad Corporation Tax Acts meaning of any body corporate or unincorporated association (which is discussed in more detail in: Who is liable to pay corporation tax?).

The vast majority of entities being assessed as to whether they are CFCs are non-UK incorporated companies (because CFCs must be resident outside the UK, for which see: CFC rules—meaning of UK and non-UK residence).

HMRC recognised in respect of the old CFC rules that there may be some doubt over whether a foreign entity falls within this wide definition of