Controlled foreign companies (CFCs)

By Tolley in association with Robert Langston of Saffery Champness

The following Corporation Tax guidance note by Tolley in association with Robert Langston of Saffery Champness provides comprehensive and up to date tax information covering:

  • Controlled foreign companies (CFCs)
  • Introduction
  • Basic principles
  • Gateway
  • Exemptions
  • Attributable profits
  • Reliefs against the CFC charge


The CFC rules as outlined in this note apply to accounting periods beginning on or after 1 January 2013, the date upon which significant changes made by Finance Act 2012 became effective.

From this date, the CFC rules also apply to foreign branches in respect of which an exemption election has been made.

The rules are complex and this guidance note outlines the main provisions only.

HMRC guidance on the CFC regime is available at INTM190000 onwards.

Pre-1 January 2013 regime

As mentioned above, significant changes to the CFC regime were introduced by Finance Act 2012. For further details of the old CFC regime, please see Simon’s Taxes, D4.3 (subscription sensitive). This could be relevant in the context of dealing with enquiries into corporation tax returns for accounting periods ending prior to the changes in legislation.

Basic principles

A CFC is any company which is resident outside the UK, but ‘controlled’ by a UK resident person or persons (which can include companies and individuals). UK resident persons control a company if they have the power to secure that the affairs of the company are conducted in accordance with their wishes, or if they are entitled to more than 50% of the proceeds on a disposal or a winding up. The definition of control is extended to include certain structures where UK resident persons hold 40% of the rights in the overseas company.

TIOPA 2010, ss 371RB–371RE

From 1 January 2019, control is further extended to where a UK company together with its associated enterprises holds more than 50% investment in the non-resident company.

FA 2019, s 20

There is a targeted anti-avoidance rule which applies where artificial steps have been taken to avoid a subsidiary being controlled from the UK.

The profits of the CFC

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