HMRC technical note: Anti-Avoidance Directive - controlled foreign companies and EU Exit

Released 6 July 2018

HMRC have published a technical note detailing changes to Controlled Foreign Company (CFC) rules to comply with the EU Anti-Tax Avoidance Directive.

Council Directive (EU) 2016/1164, commonly referred to as the EU Anti-Tax Avoidance Directive (ATAD) sets out minimum standards across a range of anti-avoidance measures which apply to corporates within member states. The Directive comes into force with effect from 1 January 2019. Art. 7 and 8 of ATAD set out detailed rules in relation to CFCs. Art. 7 covers the definition of a CFC (by reference to control and an effective rate of tax test) and the types of income which can be subject to a CFC charge. Art. 8 covers the computation and attribution of CFC profits. The UK already has comprehensive CFC rules which meet or exceed most of the requirements set out by ATAD. Those rules are set out in TIOPA 2010, Pt. 9A. However, two specific changes will need to be made to the UK CFC rules to ensure that they’re fully compliant with ATAD. These relate to the definition of control, and the treatment of certain profits generated by UK activity. The technical note sets out details of these changes.

View the technical note Anti-Avoidance Directive about controlled foreign companies and EU Exit.

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