Controlled foreign companies

In this lesson

1. 0:00 Controlled foreign companies explained
2. 0:27 Identifying a CFC in the exam
3. 1:33 Five exemptions from CFC charges
4. 3:52 Decision tree for CFC assessment
5. 4:33 Calculating chargeable profits and tax liability

About this lesson

You'll discover how to spot CFCs in exam scenarios, apply the five key exemptions, determine chargeable profits, and work out the UK corporation tax liability on the UK company's share of those profits, including relief for double taxation. The lesson covers the definition and characteristics of a CFC: a non-UK resident company where UK residents own more than 50% and profits have been artificially shifted to avoid UK tax. You'll learn the five exemptions that prevent a CFC charge, including the 12-month grace period, excluded territories with sufficiently high tax rates, low-profit thresholds, and situations where the overseas tax rate is 75% or more of the UK rate. Understanding when these exemptions apply is essential for spotting genuine CFC situations in exam questions. The practical methodology focuses on a clear decision tree: first, identify whether a company meets the CFC definition; second, check if any exemptions apply; third, determine whether chargeable profits exist. Chargeable profits are income profits calculated using UK rules that have been artificially diverted from the UK. If chargeable profits exist and no exemptions apply, you calculate the UK company's proportionate share and apply UK corporation tax, then adjust for double taxation relief and any CFC income already brought into the UK. This systematic approach ensures you capture the full CFC charge accurately.

Duration: 7m