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On 2 April 2019, the European Commission (EC) announced in a press release that it has found that the Group Financing Exemption (GFE) within the UK Controlled Foreign Company (CFC) rules is “partly justified”.

The UK CFC rules are provisions which broadly allow the UK to tax the income of overseas subsidiaries, controlled by a UK corporate parent where that income is regarded as artificially diverted from the UK.

The EC will require the UK Government to determine affected taxpayers and the quantum of tax due. It will be important to understand what approach HMRC
will seek to take to implement the decision.