The CFC regime and intellectual property

Draft legislation introducing the new CFC rules includes no specific ‘IP exemption’ and moves away from the previously proposed two-step approach to dealing with IP. Under the new rules all CFC exemptions will in principle be available to IP-holding CFCs. In practice however reliance will often need to be placed on the gateway provisions or the trading income safe harbour or excluded territories exemption. The availability of the trading income safe harbour and excluded territories exemption will be denied where an IP condition is failed. This will be the case where IP has been transferred from the UK in the past six years or potentially where the CFC’s IP is derived from UK IP. While no such IP condition is imposed under the gateway test as currently drafted the significant people function (SPF) analysis for IP-holding...