🇬🇧CFC in the United Kingdom: TIOPA 2010 Part 9A, TOAA and the FIG Regime

For a high-net-worth UK resident, the question "how does the state reach the profits of my foreign company" breaks down into two independent mechanisms. If the structure includes a UK company, the corporate CFC regime (TIOPA 2010 Part 9A) applies and the company itself bears the tax. If an individual holds the foreign company directly, Transfer of Assets Abroad (ITA 2007 ss.714–751) kicks in at the individual level. The regimes are written in different parts of the legislation, catch different persons and interface in their own way with the FIG regime and Pillar Two. Below we examine the structure of each and the boundaries between them.

Concept

UK CFC charge is governed by TIOPA 2010 Part 9A — a corporate tax on undistributed chargeable profits of foreign companies controlled by UK residents (>50%). It applies only to UK resident companies; for resident individuals a separate regime applies — Transfer of Assets Abroad (TOAA, ITA 2007 ss.714–751).

In force since 1 January 2013 (Finance Act 2012 Schedule 20); replaced ICTA 1988 ss.747–756 following the ECJ decision in Cadbury Schweppes C-196/04. Part 9A is built around the CFC charge gateway: entity-level exemptions (Chapters 10–14) plus categories of chargeable profits (Chapters 4–9).

For a UK resident (HNWI) who owns a foreign company directly, Part 9A does not apply — there is no UK company in the structure. Instead, TOAA applies. With the arrival of the FIG regime (from 6 April 2025), a qualifying new resident can claim relief on foreign TOAA-attributed income for the first 4 tax years of UK residence (RFIG45400).

Historical Background

• 1984 — Finance Act 1984 ss.82–91 (Chapter VI, controlled foreign companies), later codified in ICTA 1988 ss.747–756.
• 12 September 2006 — Cadbury Schweppes v IRC C-196/04 (ECJ): CFC rules restrict freedom of establishment and are justified only against "wholly artificial arrangements".
• 2012/2013 — Finance Act 2012 s.180 + Schedule 20 introduced TIOPA 2010 Part 9A.
• 21 November 2023 — Fisher v HMRC [2023] UKSC 44: Supreme Court narrowed TOAA — shareholders are not "transferors" when the transfer is made by their own company (later partially reversed by legislation).
• 6 March 2024 — Spring Budget: announced abolition of non-dom remittance basis and replacement with FIG regime from 6 April 2025.
• 19 September 2024 — UK and Others v Commission C-555/22 P / C-556/22 P / C-564/22 P (CJEU): annulled the European Commission's 2019 decision on state aid against UK CFC Chapter 9 (Group Financing Exemption).
• 6 April 2025 — Finance Act 2025: introduced FIG regime. TOAA and Part 9A continue to apply; FIG modifies TOAA for individuals.

The Company's Own Residence

Before any CFC charge is calculated, the first question is whether the “foreign” company is itself UK tax resident. Incorporation is only one test: a company registered abroad is still UK resident if its central management and control sits in the UK.

The rule traces to De Beers Consolidated Mines v Howe (1906), where the House of Lords placed a company where its real business is carried on; HMRC practice is set out in Statement of Practice 1/90 and the International Manual at INTM120060. Wood v Holden (2006) refined the line: the board's decisions count where the directors genuinely take them, but where directors merely rubber-stamp instructions from a UK-based owner, the place of that owner's decision-making can become the company's residence. In Development Securities v HMRC [2020] EWCA Civ 1705 the Court of Appeal restored the First-tier Tribunal's finding that Jersey SPVs were UK-resident: their directors had acted on what they treated as an instruction from the UK parent, not a mere authorisation, without engaging with the substance of the decision.

A foreign tax-residence certificate supports a treaty position but does not displace the UK central-management-and-control test. Separate from residence sits the UK permanent establishment: for accounting periods beginning on or after 1 January 2026 the diverted profits tax is folded into corporation tax and the domestic permanent-establishment definition is aligned with the OECD model.

Two further owner-level channels run alongside TOAA. Gains of a close non-resident company are attributed to its UK participators under s.3 TCGA 1992. UK residential property held through a company is separately charged to ATED (Annual Tax on Enveloped Dwellings), whatever the company's place of registration or management.

Governance checklist:

• Hold board meetings where the directors genuinely deliberate, not where the minute is convenient to sign.
• Give non-UK directors full information and real discretion; nominee directors without authority fail the test.
• Keep the UK owner from pre-setting decisions — HMRC weighs the correspondence around the minute as heavily as the minute book itself.
• Record where each strategic and investment decision was taken, not only where it was documented.

CFC Charge Scope (TIOPA s.371AA)

A CFC is a non-UK resident company controlled by a UK resident or residents (>50%, s.371RB/RE).

Control tests:

• Standard >50% control test
• 40% joint venture test (s.371RC: a UK resident controller holds at least 40% and a non-UK resident co-controller at least 40% but no more than 55%)
• Accounting consolidation test (s.371RE: parent and subsidiary under FRS 102, provided at least 50% of chargeable profits would be apportioned to the parent and its UK subsidiaries)

Minimum participation threshold: a UK company falls within the charge if its apportioned interest is at least 25% of the CFC's chargeable profits (s.371BD).

CFC charge applies only to UK resident companies. Resident individuals fall under TOAA.

CFC Charge Gateway (s.371BA)

A charge arises if:

1. The CFC has chargeable profits for an accounting period
2. No entity-level exemption (Chapters 10–14) applies

Mechanics: chargeable profits → apportionment to UK companies with ≥25% interest → charge at main UK CT rate (25% from FY 2023) → deduction of creditable tax (foreign tax paid).

Entity-Level Exemptions (Chapters 10–⁠14)

• Chapter 10 — Exempt Period (s.371JA): 12-month grace period for newly acquired CFCs.
• Chapter 11 — Excluded Territories (s.371KA): CFCs in jurisdictions listed in SI 2012/3024 (Controlled Foreign Companies (Excluded Territories) Regulations 2012) subject to qualifying income conditions. HMRC INTM225000.
• Chapter 12 — Low Profits (s.371LA / s.371LB):
  • Accounting profits ≤£50,000 (s.371LB(2)), OR
  • Assumed taxable total profits ≤£50,000 (s.371LB(3)), OR
  • Accounting profits ≤£500,000 + non-trading income ≤£50,000 (s.371LB(4)); the same pair of limits also applies to assumed taxable total profits (s.371LB(5)).
• Chapter 13 — Low Profit Margin (s.371MA–MC): accounting profits not exceeding 10% of relevant operating expenditure.
• Chapter 14 — Tax Exemption (s.371NA–NE): foreign tax paid is at least 75% of comparable UK CT. Designer rate provisions are excluded.

Chargeable Profit Categories (Chapters 4–⁠8)

• Chapter 4 (s.371DA–DL) — profits attributable to UK activities: "significant people functions" in the UK or assets/risks managed from the UK. Safe harbour — Conditions A–D in s.371CA. HMRC INTM200500, INTM197360.
• Chapter 5 (s.371EA–EE) — Non-Trading Finance Profits (NTFPs): passive profits from intra-group loans, unless partial/full exemption under Chapter 9 applies.
• Chapter 6 (s.371FA–FE) — Trading Finance Profits.
• Chapter 7 (s.371GA) — Captive Insurance Business.
• Chapter 8 (s.371HA) — Solo Consolidation (regulated subsidiaries).

Group Financing Exemption (Chapter 9, ss.371IA–⁠IJ)

For NTFPs from "qualifying loan relationships" (QLRs) — intra-group loans where the CFC lends to a non-UK borrower — Chapter 9 provides on claim:

• 75% exemption (s.371ID) — partial exemption, standard relief
• 100% exemption — if loans are funded from "qualifying resources" (s.371IB) or "matched interest" applies (s.371IE)

The state aid saga around Chapter 9 Group Financing Exemption:

• October 2017 — European Commission opened investigation SA.44896
• 2 April 2019 — European Commission decision: Chapter 9 is incompatible state aid in respect of NTFPs from QLRs under s.371EB (UK SPF), but NOT under s.371EC (UK capital investments). Published in OJ 20 August 2019.
• UK reformed Chapter 9 from 1 January 2019
• 8 June 2022 — General Court (T-363/19, T-456/19) upheld the European Commission
• 19 September 2024 — CJEU on appeal (C-555/22 P + C-556/22 P + C-564/22 P) annulled the decision: the European Commission incorrectly defined the reference framework. The exemption survived.
• 2024–2026 — epilogue: following annulment, the Controlled Foreign Companies (Reversal of State Aid Recovery) Regulations 2024 (SI 2024/1307) returned previously recovered amounts to companies, and Finance Act 2026 s.51 (Royal Assent 18 March 2026) settled interest on repayments.

Transfer of Assets Abroad (ITA 2007 ss.714–⁠751)

Scope: UK resident individuals, not companies. Origins — Finance Act 1936; current version — ITA 2007 Part 13 Chapter 2.

Three charges:

• s.720–721 — Income charge: UK resident has "power to enjoy" in relation to income of a person abroad connected with a relevant transfer
• s.727–728 — Capital sum charge: UK resident receives a capital sum connected with the transfer
• s.731–733 — Benefits charge: UK resident receives a benefit

Motive Defence (ss.737–742):

• Condition A: it is reasonable to conclude that tax avoidance was NOT a purpose; OR
• Condition B: transactions were genuinely commercial and not designed for tax avoidance

For transactions after 4 December 2005, the reformulated test in s.737 applies.

Fisher v HMRC [2023] UKSC 44 (21 November 2023): The Supreme Court unanimously held that shareholders are NOT "transferors" for TOAA purposes when the transfer is made by a company they own. The Fishers' shareholdings in SJA (which in February 2000 transferred the telebetting business to Gibraltar-based SJG) did not make them transferors. Taxpayers' appeals allowed.

Legislative reversal: Finance (No.2) Act 2024 introduced new ss.720A/727A ITA 2007 — deeming provisions treating participators in a close company as "transferors" for transfers made by the company itself (including foreign companies that would be close if UK resident). Applies to income arising from 6 April 2024; partially reverses Fisher for close company structures.

Interface with FIG Regime (from 6 April 2025)

FIG regime (Finance Act 2025): for qualifying new residents — the first 4 UK tax years after ≥10 years of non-residence.

Interface with TOAA (HMRC RFIG45400): income attributed under s.720 (power to enjoy) or s.727 (capital receipt) and treated as foreign under ss.726/730 qualifies for FIG relief on claim. The individual elects FIG separately for each year; exempt income is not subject to UK income tax for all 4 years.

Part 9A for UK Holdco unchanged: if the structure includes a UK company, Part 9A continues to apply regardless of the ultimate shareholder's FIG status.

Pillar Two (Finance (No.2) Act 2023 Part 3)

• MTT (Multinational Top-up Tax) — UK IIR. For accounting periods beginning on or after 31 December 2023.
• DTT (Domestic Top-up Tax) — UK QDMTT, Part 4 of the same Act. Same start date.
• UTPR: Finance Act 2025 / Schedule 4, for accounting periods beginning on or after 31 December 2024.

Scope: MNE groups with consolidated revenue ≥€750 million in ≥2 of the 4 preceding accounting periods.

Interface with CFC: Pillar Two IIR is essentially a "super-CFC" with broader coverage. UK position: CFC charges under Part 9A are counted first when calculating the CFC's ETR for GloBE; these taxes are "pushed down" to the CFC level. If the CFC charge brings the CFC's ETR to ≥15%, no additional top-up under Pillar Two arises. Schedule 12 FA 2024 + Schedule 4 FA 2025. A QDMTT in every jurisdiction is computed without a push-down of taxes on controlled foreign companies and foreign branches: the parent jurisdiction's CFC tax does not enter that computation and does not reduce the local top-up (side-by-side package, 5 January 2026).

Side-by-Side (from 2026): under the G7 political agreement (June 2025) and OECD Inclusive Framework administrative guidance (5 January 2026), US-parented groups electing the Side-by-Side safe harbour are excluded from IIR and UTPR — their domestic GILTI/NCTI and CFC rules are recognised "side by side" with Pillar Two; QDMTT continues to apply. The UK announced on 7 January 2026 that it will implement the safe harbour in the next Finance Bill retrospectively — for accounting periods beginning on or after 1 January 2026. Part 9A remains: UK CFC charges are still counted first when calculating the structure's ETR for GloBE.

Reporting under the regime runs separately from payment. A UK group within scope files an information return 15 months after the end of the accounting period, and 18 months for the first period in which the group is registered (Finance (No. 2) Act 2023, Schedule 14, paras 10(9)–(11)); computed dates falling before 30 June 2026 move to that date (para 10(12)). The first returns therefore covered the 2024 fiscal year and fell due on 30 June 2026. Where the return for the whole group is filed centrally in a jurisdiction with which HMRC has an information-sharing agreement, the UK filing member submits an overseas return notification by the same deadline instead of the return itself (paras 10(4)–(6)): central filing removes the filing, never the local notification. Late filing costs £100 if the return arrives within three months of the submission date, £200 within six, thereafter £200 plus £60 for each day; on a third successive failure these rise to £500 and £1,000 (para 42). The detail sits in global minimum tax reporting.

Practical Conclusions for HNWIs

UK resident owning a foreign company directly:

• Part 9A does not apply (no UK company in structure)
• TOAA gateway applies — most likely s.720 (power to enjoy) will be triggered
• Motive defence can be considered
• Fisher protection after Finance (No.2) Act 2024 for transfers through close companies is severely limited

UK resident owning through UK Holdco:

• Part 9A applies to UK Holdco
• Holdco bears CFC charge (CT 25%) on apportioned chargeable profits where interest ≥25%
• Individual does not pay tax directly

Qualifying new resident under FIG:

• TOAA-attributed income from a foreign personal investment company is potentially exempt on FIG election (RFIG45400) for 4 tax years
• After 4 years TOAA applies in full — the motive defence (ss.736–742) remains; the entity-level exemptions of Part 9A matter only where a UK Holdco sits in the structure

Pillar Two for HNWI family offices: typically relevant only if the structure is part of an MNE group with consolidated revenue ≥€750 million. Typical PIC structures fall well short of the threshold.

Compliance:

• CT600 + CT600B — UK company reporting for CFC charges (CT600B covers CFC, foreign branch exemptions, hybrid mismatches)
• SA106 (Foreign pages) — individual reporting for foreign income, including TOAA-attributed
• FIG election — in SA return for qualifying new residents; separate FIG pages from 2025/26

In practice, everything hinges on one question: is there a UK entity in the structure? UK Holdco — and Part 9A calculates apportioned chargeable profits, tax at 25% borne by the company. Direct individual ownership — Part 9A is silent and TOAA looks through "power to enjoy"; FIG gives only a four-year reprieve and costs the loss of personal allowance and CGT annual exempt amount. Pillar Two covers groups with turnover ≥€750 million from above, preserving CFC and TOAA beneath it.

Compared with other countries of residence, the UK sits in a middle group: it has no CFC charge on individuals, yet TOAA reaches the same foreign income through the individual's own transfer and power to enjoy. Germany, Spain, Italy and Sweden attribute a controlled company's profit to a resident individual directly; Cyprus, Switzerland and the UAE have no rule that reaches the person at all. The sixteen-country table is on the CFC master guide.