Commentary

D4.431 CFC gateway—profits from qualifying loan relationships

Corporate tax
Corporate tax | Commentary

D4.431 CFC gateway—profits from qualifying loan relationships

Corporate tax | Commentary

D4.431 CFC gateway—profits from qualifying loan relationships

For the latest New Development, see ND.1495.

A chargeable company (D4.439) may make a claim for exemption of certain intra-group non-trading finance profits that would otherwise pass through the CFC charge gateway because they fall within D4.427. In order to make this claim the profits must arise from qualifying loan relationships and the business premises condition at TIOPA 2010, s 371DG (D4.426) must also be met1.

In order to comply with the EU requirements of the Anti-tax avoidance directive (EU 2016/1164), Finance Act 2019, s 20 amended the definition of qualifying loan relationship profits which would be covered by this exemption2. For CFC accounting periods beginning on or after 1 January 2019, the profits eligible for the exemption are non-trading finance profits from all the CFC's qualifying loan relationships taken together which:

  1.  

    •     fall within TIOPA 2010, s 371EC (capital investment from the UK), and

  2.  

    •     do not fall within TIOPA 2010, s 371EB (UK activities)

So the profits eligible for the exemption detailed below are limited to those which fall only within TIOPA 2010, s 371EC (UK connected capital) and exclude those which pass the gateway test in Chapter 5 (TIOPA 2010, ss 371EA–371EE) by virtue of UK significant people functions. Prior to 1 January 2019 this restriction did not apply.

If a CFC has an accounting period which straddles 1 January 2019, the period is split into two separate periods and any necessary apportionments made on a time basis or, if appropriate, a just

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