Controlled foreign companies exemption was state aid

The European Commission ruled that the UK’s controlled foreign companies (CFC) group financing exemption (TIOPA 2010 Pt 9A ch 9) constituted state aid to the extent that it applied to non-trading finance profits from qualifying loans where the decision-making functions were in the UK - where TIOPA 2010 s 371EB applied. The exemption was not state aid where the profits arose from UK funds or assets (s 371EC) and s 371EB did not apply.

The UK government and ITV applied to the General Court to annul the commission’s decision.

The court held that the commission had not made any errors in concluding that the exemption provided a selective advantage since it introduced a difference in treatment between companies in a comparable situation. In particular there was a difference in treatment between CFCs making qualifying loans to non-UK companies and those making ‘upstream loans’ to UK companies...