Changes to the CFC rules to ensure that the UK receives a fairer share of tax on the profits of multinationals were announced.
The CFC rules are designed to stop UK companies avoiding tax in this country by diverting income to subsidiaries (CFCs) in tax havens and preferential regimes. The rules work by requiring UK companies to pay an amount of CFC tax equal to any tax that would otherwise be avoided.
The measures build on the steps taken in the last two Budgets to reinforce the fairness and effectiveness of the CFC rules, and form part of a continuing resolve to ensure that the rules keep pace with developments in the global economy.
UK companies will continue to be exempt in respect of CFCs which are not involved in UK tax avoidance.
The Budget changes will strengthen the legislation and update the rules to take account of developments in the ways multinationals are structured and do business. The motive test in the CFC rules will ensure that UK companies will continue to be exempt in respect of CFCs which are not involved in UK tax avoidance.