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The excluded territories exemption aims to exempt those CFCs that pose a low risk to the UK corporate tax base by artificial diversion of UK profits, due to their territory of residence or the type of income that they receive.

A CFC will be excluded from the CFC charge if¹:

1. Ìý

   •ÌýÌýÌýÌý the company is resident and carries on business in an excluded territory as specified in SI 2012/3024

2. Ìý

   •ÌýÌýÌýÌý the total of the CFCs relevant income (Categories A-D, see below) does not exceed the 'threshold amount' of 10% of the CFC's accounting profits excluding transfer pricing adjustments for the accounting period in question, or £50,000 if greater (reduced proportionately if the accounting period is less than 12 months) ²

3. Ìý

   •ÌýÌýÌýÌý the IP condition is met (see below), and

4. Ìý

   •ÌýÌýÌýÌý the CFC is not involved in an arrangement, the main purpose or one of the main purposes of which is to obtain a tax advantage ³ for any person at any time during the accounting period

For the purpose