Commentary

D4.426 CFC gateway: profits attributable to UK activities

Corporate tax
Corporate tax | Commentary

D4.426 CFC gateway: profits attributable to UK activities

Corporate tax | Commentary

D4.426 CFC gateway: profits attributable to UK activities

It is necessary to firstly establish in what situations this gateway test applies and then if it does, the extent to which profits pass through the gateway. Only profits which pass through the gateway are potentially liable to the CFC charge.

Establishing whether the test applies

The default position is that this gateway test applies to all CFCs. However if one of the following conditions is met, then it will not apply1:

  1.  

    •     it does not have UK tax minimisation as a main purpose — ie at no time in the accounting period does the CFC hold assets or bear risks under an arrangement, the main purpose, or one of the main purposes, of which is to reduce/eliminate any liability to UK tax and as a result of the arrangement the CFC expects its business to be more profitable than it would otherwise be

  2.  

    •     the CFC has no UK managed assets and bears no UK managed risks at any time during the accounting period

  3.  

    •     the CFC has itself the capability throughout the accounting period to ensure that its business would be commercially effective if its UK managed assets and risks were to stop being UK managed; or

  4.  

    •     the CFC's assumed total profits (see D4.420) only consist of (one or both of) non-trading finance profits or property business

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