CFCs and the finance company partial exemption: opportunities and structures

There has been significant criticism of the complexity of the new draft CFC legislation and the significant uncertainty that it creates particularly through the use of targeted anti-avoidance rules throughout the legislation. Nonetheless, the much anticipated finance company partial exemption (FCPE) brings a level of certainty for the taxpayer that demonstrates that the UK is ‘open for business’ and is an opportunity that should be seized by all. The FCPE will enable UK groups to set up overseas finance companies to fund the development of their group operations outside of the UK without being subject to a significant UK tax penalty. This article considers practical examples of the types of structures that may be implemented and the potential tax savings available.