SolvedINTM203560 | Controlled Foreign Companies: The CFC Charge Gateway Chapter 5 - Non-trading finance profits: Capital investment from the UK: Example of capital investment from the UK: Earlier contribution by the UK parent - trading profits
From HM Revenue & Customs · International Manual
An offshore holding company received £100m of capital funding from its UK parent ten years previously, and then used that £100m to equity invest in trading subsidiaries in order for those subsidiaries to carry out major capital development projects in order to expand their markets.
The trading subsidiaries pay £150m of profits back to the holding company as dividends in 2015 and the holding company uses that £150m to subscribe for shares in a new financing CFC.
If as a matter of fact it can be demonstrated that the original £100m equity remains in the trading subsidiaries, then it is likely in these circumstances, where none of the capital has been returned to the holding company, that none of the £150m equity investment into the Finco CFC has been made from funds received from the UK parent. If however as a matter of fact there had been a previous capital reduction and these sums can be identified as being used to provide the equity for the new financing CFC, the assets of the CFC will derive from funds indirectly received from the UK parent.
For visual illustration view the company structure and loan flow