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

The basic rule

Section 371JB sets out the three conditions that must all be satisfied for a controlled foreign company to benefit from the exempt period exemption from the CFC charge.

• The CFC's accounting period must end during an exempt period, the subsequent period condition must be met, and the chargeable company condition must be met — all three are required.
• The subsequent period condition requires that the CFC continues to exist as a CFC beyond the exempt period and that no CFC charge arises in its first accounting period after the exempt period ends.
• The chargeable company condition requires that, throughout the relevant period, the UK companies that would be liable to the CFC charge are the same as (or connected with) those that were chargeable at the start of the exempt period.
• The exemption is subject to a separate anti-avoidance rule in section 371JF, which can override the exemption even where all three conditions are otherwise met.