Taxes Consolidation Act 1997 section 835Y

Relief on certain disposals of shares or securities in a controlled foreign company

Section 835Y provides relief, by way of a deduction against the chargeable gain, where a company disposes of shares or securities in a controlled foreign company (CFC) or a connected company and a CFC charge has previously been made on the disposing company.

• Where a controlling company or a connected company (the "disposing company") sells shares in a CFC or a company connected with the CFC (the "disposed company"), and a CFC charge has been made on the disposing company by reference to its interest in the disposed company, a deduction is allowed against the disposal consideration when computing the chargeable gain.
• The deduction is calculated using one of two formulae depending on the relationship between the disposing company and the chargeable company: the formula A × (B/C) applies where there is one disposing company, and D × (E/F) applies where there is more than one disposing company.
• Where the CFC has made a distribution from income that was subject to the CFC charge and relief under section 835X has been given in respect of that distribution, the CFC charge figure used in the formulae is reduced by the amount of the charge corresponding to the income represented by that distribution, to prevent a double deduction.
• Shares or securities of the same class are identified on a first in, first out (FIFO) basis, so that shares acquired earlier are deemed to be disposed of before shares acquired later.