INTM203350 - Controlled Foreign Companies: The CFC Charge Gateway Chapter 5 - Non-trading finance profits: UK Activities: Example of a standard cash pooling arrangement located offshore
A UK Group owns a CFC incorporated and treated as resident in Hong Kong that manages cash pooling for its South East Asian sub-group. The functions of the CFC include daily cash centralisation activities, managing liquidity and foreign exchange services and the CFC provides interface with banks for banking facilities. The CFC has a staff of ten people and a local Board of directors which manage the ongoing cash pooling and make active decisions concerning lending, overnight deposits and short term investments in debt securities. The CFC makes a small margin on its activities (as well as paying a small fee to UK Group Treasury for provision of governance services). The CFC makes no structural long-term loans.
In these circumstances it is likely that there are no UK significant people functions (SPFs) involved in the cash pooling arrangements as the ongoing management of any assets and risks involved in the arrangements is carried out by the staff in Hong Kong. If the UK is simply carrying out a governance role, this will not amount to a SPF in respect of the cash-pooling arrangements. However if the CFC makes long-term structural loans, as well as carrying on cash-pooling, it will be necessary to consider where and in what context these loans were conceived and created and who manages the risk associated with making them. It is likely, with a UK owned group that this will be carried out at the centre of its operations i.e. in the UK group treasury.