Following on from the major changes to the UK's CFC regime enacted as part of Finance Act 2012, HM Treasury published Draft Regulations for the new Excluded Territories Exemption (ETE).

The purpose of the ETE within the new CFC regime is to exempt CFCs that are resident in territories where the CFC's income is taxed at a rate broadly similar to that of the UK main corporate tax rate and where the CFC satisfies some general residence and income conditions.

The newly published regulations provide the list of excluded territories for the purposes of the ETE and set out a simplified ETE that is available for CFCs in Australia, Canada, France Germany, Japan and USA. The simplified ETE is intended to allow groups to deal quickly with CFCs in these territories, which are major trading partners that have tax regimes broadly equivalent to the UK's. The simplified ETE is an additional, optional basis for exemption that will not affect entitlement to ETE under the normal rules.