Corporation tax – EU state aid decision on UK CFC finance exemption regime
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Corporation tax – EU state aid decision on UK CFC finance exemption regime
Corporation tax – EU state aid decision on UK CFC finance exemption regime
Wed 08 May 2019
A European Commission (EC) press release announced its conclusion that the UK CFC (controlled foreign company) finance exemption was partly justified, but also provided illegal state aid to some multinational companies.
On the assumption the UK accepts the EC decision, it is now up to HMRC and HMT to determine who has unfairly benefitted from the measure and recover the tax advantage.
The UK CFC financing exemption was amended by FA 2019 s20 with effect from 1 January 2019 to remove the benefit of the measure where loan relationship non-trade finance profits derive from capital investment from the UK (per TIOPA 2010 s371EC) and are generated from UK activities (per TIOPA 2010 s371EB).
The full text of the EC decision (announced on 2 April 2019) was made available on 25 April. It indicates the UK has two months to supply to the Commission a list of those that have benefitted from the regime, and that the decision (including recovery of the state aid amounts) must be fully implemented within 4 months of the publication of the decision.
It will be interesting to see how HMT and HMRC respond to EC announcement. If your business is affected by the decision, please get in touch with a member of the Mazars international tax team to discuss the possible actions.
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