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13.3.1. Profits attributable to UK Significant People Functions (“SPF”)

This condition examines whether the CFC has any assets, or bears any risks that are managed or controlled to any significant extent by the CFC itself or a connected company on non-arm’s length terms.  

Where the CFC does not have assets or risks which are attributable to the UK SPFs, then the profits do not pass through this gateway.  Where they do, the profits would still not pass through the gateway if the business of the CFC was commercially effective were the assets and risks not managed or controlled by the UK in that way.  

The identification of SPF involved in the economic ownership of assets and the assumption of risks follows OECD principles, and will entail the preparation of a functional analysis, setting out the functions, assets and risks which are performed in transfer pricing documentation exercises. This will enable the profits to be attributed to the UK company and the CFC, in order to determine if any artificial diversion of profits have occurred.