{"id":483,"date":"2025-05-08T04:32:29","date_gmt":"2025-05-08T04:32:29","guid":{"rendered":"https:\/\/yaveni.com\/blog\/?p=483"},"modified":"2025-05-08T04:32:31","modified_gmt":"2025-05-08T04:32:31","slug":"aqua-inc-is-a-company-registered-and-incorporated-in-the-republic-of-emlynia","status":"publish","type":"post","link":"https:\/\/gaviki.com\/blog\/aqua-inc-is-a-company-registered-and-incorporated-in-the-republic-of-emlynia\/","title":{"rendered":"Aqua Inc is a company registered and incorporated in the Republic of Emlynia"},"content":{"rendered":"\n

Aqua Inc is a company registered and incorporated in the Republic of Emlynia. Its shares are held as follows:<\/p>\n\n\n\n

Beige Ltd UK resident 5,000
Sky Ltd UK resident 400
Salmon Weynes (a private individual) UK resident 3,000
Diamond SA (a French company) resident in France 3,600
Total: 12,000<\/p>\n\n\n\n

All directors of Aqua Inc are resident in Emlynia and all strategic decisions of the company are taken there. The company will be considered tax resident in Emlynia.<\/p>\n\n\n\n

(i) Is Aqua Inc controlled by UK tax residents? If yes, who would be liable to a CFC charge under UK legislation? [5 marks]<\/p>\n\n\n\n

Aqua Inc\u2019s accounts reveal the following:<\/p>\n\n\n\n

Trading profits 6,000
Interest received 2,500
Capital gain<\/p>\n\n\n\n

The correct answer and explanation is :<\/strong><\/mark><\/p>\n\n\n\n

Answer:<\/h3>\n\n\n\n

(i) Is Aqua Inc controlled by UK tax residents?<\/strong><\/p>\n\n\n\n

Yes<\/strong>, Aqua Inc is controlled by UK tax residents.<\/p>\n\n\n\n

To determine control for UK Controlled Foreign Company (CFC)<\/strong> purposes, we apply UK Corporation Tax rules<\/strong> under Part 9A of the Taxation (International and Other Provisions) Act 2010 (TIOPA 2010)<\/strong>. A foreign company is considered a CFC if it is controlled by UK residents.<\/p>\n\n\n\n

Control<\/strong> is broadly defined in this context and includes:<\/p>\n\n\n\n

    \n
  1. Legal control<\/strong> \u2013 more than 50% of share capital or voting rights held by UK residents;<\/li>\n\n\n\n
  2. Economic control<\/strong> \u2013 UK residents entitled to more than 50% of profits or assets on a winding up;<\/li>\n\n\n\n
  3. Accounting control<\/strong> \u2013 the UK person is required to consolidate the foreign entity in its financial statements.<\/li>\n<\/ol>\n\n\n\n

    Shareholding Analysis:<\/h4>\n\n\n\n
    Shareholder<\/th>Residency<\/th>Shares<\/th>% Ownership<\/th><\/tr><\/thead>
    Beige Ltd<\/td>UK<\/td>5,000<\/td>41.67%<\/td><\/tr>
    Sky Ltd<\/td>UK<\/td>400<\/td>3.33%<\/td><\/tr>
    Salmon Weynes<\/td>UK<\/td>3,000<\/td>25.00%<\/td><\/tr>
    UK Residents Total<\/strong><\/td><\/td>8,400<\/td>70.00%<\/strong><\/td><\/tr>
    Diamond SA<\/td>France<\/td>3,600<\/td>30.00%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

    Conclusion on Control<\/strong>:
    UK residents hold 70% of the shares<\/strong> and thus meet the control threshold. Therefore, Aqua Inc is controlled by UK residents<\/strong> for CFC purposes.<\/p>\n\n\n\n

    Who is liable to a CFC charge?<\/h4>\n\n\n\n

    A CFC charge<\/strong> under UK tax law is only levied on UK resident companies<\/strong> that have a 25% or greater interest<\/strong> in the CFC.<\/p>\n\n\n\n

    Thus, liability for the CFC charge lies with:<\/p>\n\n\n\n

      \n
    • Beige Ltd<\/strong>: 5,000\/12,000 = 41.67%<\/strong> \u2192 liable<\/strong><\/li>\n\n\n\n
    • Sky Ltd<\/strong>: 400\/12,000 = 3.33%<\/strong> \u2192 not liable<\/strong><\/li>\n\n\n\n
    • Salmon Weynes<\/strong>: An individual \u2192 individuals are not subject to the CFC charge.<\/li>\n<\/ul>\n\n\n\n

      Final Answer:<\/h3>\n\n\n\n
        \n
      • Aqua Inc is controlled by UK tax residents.<\/strong><\/li>\n\n\n\n
      • Beige Ltd<\/strong> is liable to a CFC charge<\/strong> under UK legislation as it holds more than 25% of the company.<\/li>\n\n\n\n
      • Sky Ltd<\/strong> and Salmon Weynes<\/strong> are not liable<\/strong> to the CFC charge.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"

        Aqua Inc is a company registered and incorporated in the Republic of Emlynia. Its shares are held as follows: Beige Ltd UK resident 5,000Sky Ltd UK resident 400Salmon Weynes (a private individual) UK resident 3,000Diamond SA (a French company) resident in France 3,600Total: 12,000 All directors of Aqua Inc are resident in Emlynia and all […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-483","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/483","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/comments?post=483"}],"version-history":[{"count":1,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/483\/revisions"}],"predecessor-version":[{"id":484,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/483\/revisions\/484"}],"wp:attachment":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/media?parent=483"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/categories?post=483"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/tags?post=483"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}