Introduction Background Note
52.The CFC legislation is at sections 747 to 756 of and Schedules 24 to 26 to ICTA. It is designed to counter the artificial diversion of profits from the UK by UK resident companies to companies which they control and which are located in low tax territories. It does this, broadly, by apportioning the diverted profits to, and taxing them on, those UK residents with a relevant interest in the non-resident company.
53.The effect of the CFC legislation is limited by a series of exemptions. There are five such exemptions which were designed to exclude from the scope of the rules those CFCs that can be reasonably assumed not to exist so as to artificially divert profits from the UK.
54.The Schedule repeals the ADP exemption and amends the exempt activities exemption to remove the special rules applying to holding companies apart from those applicable to local holding companies.