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The ADP exemption was abolished in FA09 for accounting periods of CFCs beginning on or after 1 July 2009. This guidance only applies to APs ending on or before 30 June 2009

ICTA88/SCH25/PARA2(8)

An adjustment may be necessary to the fraction used to establish the ‘appropriate portion� of net chargeable profits for the purposes of INTM254710 where United Kingdom residents have an indirect interest in a controlled foreign company. An indirect interest will exist where the United Kingdom residents hold an interest in a non-resident company which in turn holds shares in a controlled foreign company. Where necessary, the numerator of the fraction is reduced to reflect both the United Kingdom residents� interests in the intermediate non-resident company and that company’s shareholding in the controlled foreign company.

Example

United Kingdom residents hold 60 and non-residents hold 40 of the 100 issued shares in a non-resident company A which in turn holds 90% of the single class of issued shares of controlled foreign company B. The numerator of the fraction by which available or net chargeable profits are multiplied is reduced to:

(60% x 90%)/100 = 54

so that the adequacy of a dividend treated as paid by the controlled foreign company to United Kingdom residents is measured against 54% of the company’s net chargeable profits.