Question to the HM Treasury:

To ask Mr Chancellor of the Exchequer, what assessment he has made of the effect of the changes to CFC rules introduced in the 2010 Emergency Budget on corporation tax receipts in each year of the last Parliament.

Controlled Foreign Company (CFC) rules are designed to protect the UK tax base by preventing multinational groups based in the UK from diverting their UK profits artificially to companies in low tax jurisdictions to reduce their UK tax bill. They work by charging UK tax on those profits and so act as a deterrent to this behaviour.

The Government reformed the Controlled Foreign Company (CFC) rules after close consultation with stakeholders in 2012. This was the first substantial revision to the rules since their introduction in 1984.

This modernised CFC regime, which took effect in 2013, is closely targeted on artificially diverted profits to protect the UK tax base while reflecting modern global business practices.

The Summer Budget also announced strengthening of the CFC rules to tackle aggressive tax planning by preventing UK based multinationals offsetting their losses against the UK’s CFC tax on profits they divert from the UK.

As with all aspects of the tax system, the Government will keep this legislation under review, and will act to prevent abuse of these rules.