PBR: Groups to get discretionary clearance under new CFC rules

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The Treasury announced as part of the pre-budget report that changes had been made to the tax rules governing controlled foreign companies (CFCs).

As the Treasury made clear, alterations to the CFC rules were made necessary by the September European Court of Justice Cadbury Schweppes ruling that the UK controlled foreign company rules breach EU legislation except where wholly artificial arrangements were concerned.

The EU's advocate-general decided that a parent company establishing a subsidiary in another member state to benefit from a more favourable tax regime does not, in itself, represent an abuse of the freedom of establishment, a view which HMRC contested.

To accommodate the new ruling, draft clauses changing the CFC rules will be included in the Finance Bill, but will be effective fro...

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