Summer Budget 2015: Corporation tax – CFCs loss restriction

The UK Controlled Foreign company ‘CFC’ regime targets profits which have been diverted from the UK. Under current rules, a CFC charge is computed by reference to the profits of the CFC for an accounting period. A claim can be made to offset certain expenses and losses to reduce the amount of tax payable.

Where profits arise within a CFC accounting period starting on or after 8 July 2015, relief for these expenses and losses will no longer be available. This specifically includes:


  • Losses and surplus expenses arising in the current year or brought forward from previous years; and
  • Losses and surplus expenses arising in other group companies.


For accounting periods that straddle 8 July 2015, the relief will be restricted on a just and reasonable basis.

This change, which will affect large UK companies with overseas subsidiaries in low tax jurisdictions, is part of the measures to counter perceived avoidance particularly by multinational groups and to maintain competitiveness of the UK corporation tax regime.