• Service: Tax, Global Indirect Tax, Global Mobility Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 4/25/2014

United Kingdom - Draft CFC guidance, thin capitalisation update 

April 25: HM Revenue & Customs (HMRC) published draft guidance concerning one of the amendments to the controlled foreign company (CFC) exemption rules contained in the 2014 Finance Bill?i.e., the amendment that prevents the exemption applying to a loan if it is connected with an arrangement that has a main purpose of artificially diverting, into a CFC, profits that are currently received by a UK group company.

The draft HMRC guidance [PDF 77 KB] provides an overview of the draft legislation and then sets out HMRC’s view on its application in 11 different scenario or fact patterns, including:

  • Different outcomes in situations involving replacing one common structure (a tower structure) with another (an Irish/UK conduit structure)
  • The operation of the draft legislation when one group purchases another using temporary funding from the UK
  • The position when a group funds its overseas entities using revolving intra-group facilities, such as overdrafts
  • The operation of the draft legislation for a loss-making group

Guidance on thin capitalisation

The thin capitalisation guidance in the HMRC International Manual has been updated.

Some of the main changes to the content are as follows:

  • The inclusion of an option to extend an advance thin capitalisation agreement (ATCA) if the funding in question is likely to be refinanced within 18 months of expiry of the ATCA
  • A recommendation to hold initial meetings with taxpayers rather than enter into detailed correspondence
  • Confirmation that Transfer Pricing Panel approval is not always required for an ATCA in smaller cases
  • New guidance on netting debt

Read an April 2014 report [PDF 900 KB] prepared by the KPMG member firm in the United Kingdom: Weekly Tax Matters (25 April 2014)

Also included in the KPMG report are discussions of the following topics:

  • BEPS update
  • Central registry of UK company beneficial ownership information
  • UK treaty priorities announced
  • Country-by-country reporting – EU Accounting Directive
  • Release of additional HMRC Guidance on the payment of trail commission
  • British Telecommunications Plc - Court of Appeal - Judgment
  • Round up of recently released VAT Briefs
  • France – Temporary tax on high remuneration compliance developments
  • Real Time Information round up
  • New HMRC powers to tackle offshore tax evasion
  • Government opposing EU trust registry plan

©2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

The KPMG logo and name are trademarks of KPMG International.

KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.

The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Direct comments, including requests for subscriptions, to
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.


Share this

Share this


Subscribe to receive the latest TaxNewsFlash email alerts (you must select the option for TaxNewsFlash)

Already a Subscriber? Login

Not a member? Subscribe now