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Establishing whether the test applies

Chapter 3 sets out the queries to be answered in ascertaining whether the Chapter 5 gateway applies. This gateway test applies if the CFC has non-trading finance profits ¹ but this is subject to an incidental non-trading finance profit safe harbour amount of up to 5% (see below).

Non-trading finance profits are defined as profits from loan relationships which would be chargeable to corporation tax under CTA 2009, s 299 (D1.701) and non-exempt distributions within CTA 2009, Pt 9A (Division D5.1). Examples include interest income on non-trading loans, exchange gains and losses on loan relationships, disguised interest etc. Non-trading finance profits also include profits arising from a relevant finance lease².

Specifically excluded from the definition of non-trading finance profits (for the purposes of this gateway test) are profits which arise from the investment of funds held for the purposes of a trade if that trade is carried on by a CFC and no profits of that trade for the accounting period pass through the CFC charge gateway³.