Commentary on Sections Overview Overview Section 179: Compensating payment if advantaged person is controlled foreign company
366.This section provides for a compensating adjustment to be made to the disadvantaged company where the advantaged company is a non-UK resident company whose profits have been apportioned to UK residents under the controlled foreign company (CFC) provisions in Chapter 4 of Part 17 of ICTA. It is based on paragraph 6B of Schedule 28AA to ICTA.
367.Because the CFC’s profits on which the adjustment is made are not those of a person on whom a potential advantage in relation to United Kingdom taxation is conferred, the “advantaged person” does not fall within section 174(1). There is no advantage to the CFC in relation to United Kingdom taxation.
368.Special provision is therefore required to allow a claim under section 174. This is done by treating the CFC as if it fell within that section.
369.“Chargeable profits” in subsection (1)(b) is the term used by the controlled foreign company legislation for the CFC’s taxable profits (section 747(6) of ICTA).
370.In subsection (3) the amended readings to sections 174 to 178 are necessary because the return of the chargeable profits of the CFC is not made by the “advantaged person” (the CFC) but by the company which controls that company and on whom the apportionment of chargeable profits will be made. Likewise the relevant notice will be given to the same company.