The apparent policy intention of the amendment to the controlled foreign companies (CFCs) ‘control’ test, which came into effect on 1 January 2019, was to bring the UK rules into compliance with Council Directive (EU) 2016/1164, also known as the EU Anti-Tax Avoidance Directive (ATAD). However, the actual amendment seems to go much further than is required by ATAD: it appears that many more companies fall within the definition of a CFC than would have fallen within the pre January 2019 UK rules combined with the basic ATAD ‘control’ rules – a potentially unpalatable and unexpected outcome for taxpayers, advisers and compliance firms alike.
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The apparent policy intention of the amendment to the controlled foreign companies (CFCs) ‘control’ test, which came into effect on 1 January 2019, was to bring the UK rules into compliance with Council Directive (EU) 2016/1164, also known as the EU Anti-Tax Avoidance Directive (ATAD). However, the actual amendment seems to go much further than is required by ATAD: it appears that many more companies fall within the definition of a CFC than would have fallen within the pre January 2019 UK rules combined with the basic ATAD ‘control’ rules – a potentially unpalatable and unexpected outcome for taxpayers, advisers and compliance firms alike.
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