TTM07110 - The ring fence: Controlled foreign companies
CFC is an 'overseas shipping company'
Background 鈥� the normal rules
The normal rules for controlled foreign companies (CFCs) may impose liability to tax on a UK company if:
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- it has an interest in a CFC, and
- that CFC does not make a reasonable distribution out of the profits of any particular accounting period.
The normal rules are disapplied (byFA00/SCH22/PARA54) in certain circumstances.
Overseas shipping companies within paragraph 49
In particular, a tonnage tax company is not subject to any liability under the CFC legislation in any accounting period in respect of the profits of a CFC, if in that period any distributions received by the company from that CFC would have been 鈥榬elevant shipping income鈥�.
Distributions from an overseas subsidiary will be relevant shipping income if it is an overseas shipping company and the conditions of FA00/SCH22/PARA49 (2) are satisfied, see TTM06400.
By definition, an 鈥榦verseas shipping company' will not have any other profits that are not relevant shipping profits, although there is a de minimis exclusion, see TTM06420.
References
| FA00/SCH22/PARA54 (1) (profits of controlled foreign companies) | TTM17311 |
| Outline of controlled foreign companies | TTM07100 |