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FA 2019: controlled foreign companies

FA 2019 contains two notable changes to UK taxation of controlled foreign companies (CFCs) both of which take effect from 1 January 2019.

The current UK CFC rules were included in FA 2012 following a significant re-write of older provisions. The overarching aim of the CFC rules is to deal with profits which have been artificially diverted from the UK to a lower taxed jurisdiction. These amendments to the UK’s CFC regime have been introduced to ensure that the UK rules are fully compliant with the requirements of Council Directive (EU) 2016/1164 commonly referred to as the EU Anti-Tax Avoidance Directive.

For the UK CFC rules to be of relevance for an entity that entity needs to be both ‘controlled’ by UK persons and ‘foreign’ in its tax residence. The first FA 2019 change alters the definition of control for these purposes. Previously only ownership of UK...

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