Taxation (International and Other Provisions) Act 2010 section 371DD

Exclusion: economic value

Section 371DD provides an exclusion from CFC charge gateway profits where the CFC's holding of assets or bearing of risks generates substantial genuine economic value for the group, beyond mere tax savings.

• Amounts attributable to UK activities can be excluded from provisional Chapter 4 profits if the CFC's holding of an asset or bearing of a risk creates net economic value for the group that exceeds the value that would arise if only UK resident connected companies held the asset or bore the risk.
• The exclusion applies only where the "relevant non-tax value" — that is, the excess value stripped of any UK tax saving benefit — represents a substantial proportion of the overall excess value (itself stripped of any foreign tax saving benefit).
• Foreign tax effects are completely disregarded in both directions: value derived from reducing foreign tax liabilities is excluded from "net economic value", and value derived from reducing UK tax liabilities is excluded from "relevant non-tax value".
• Where it is not reasonably practicable to separate individual assets or risks for the purpose of identifying the relevant significant people functions, those assets or risks may be bundled together and treated as a single asset or risk for the purposes of this exclusion.