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The government’s proposals for reforming the UK’s controlled foreign company (CFC) regime have been published.
They include a commitment to introduce a partial exemption for finance companies that will normally result in a 5.75% tax charge on those overseas profits by 2014.
The proposals are designed to strike the right balance between improving the competitiveness of the UK corporate tax system and protecting the UK tax base against avoidance by:
- targeting and imposing a CFC charge on artificially diverted UK profits, so that UK activity and profits are fairly taxed;
- exempting foreign profits where there is no artificial diversion of UK profits; and
- not taxing profits arising from genuine economic activities undertaken offshore.
Comments on the proposals should be sent to the Treasury by 22 September 2011.
‘The Treasury’s proposals for the reform of the CFC rules appear to have been worth waiting for’, said Chris Sanger, head of tax policy at Ernst & Young.
He was pleased to see confirmation that the proposals regarding intellectual property companies and finance companies will be going ahead which he said would be a help to business.
