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13.3.3. Trading Finance Profits

A CFC’s trading finance profits are chargeable to the extent that they are attributable to excess capital in the CFC and there has been an investment of direct or indirect capital by the UK connected company. Excess capital is deemed as the amount of capital which exceeds its needs, and would not have been available had it not been at least 51% held by the UK connected company.

If the CFC has received a loan from another CFC which qualifies for under the finance company exemption, the outstanding principal of the loan must be added to the CFC’s capital to the extent that the profits of the loan are exempt.

Where the CFC is a group treasury company, an election can be made to treat the profits as non-trading finance profits.  These profits are then dealt with under the non-trading finance profits, and the finance company exemption may apply.