The European Commission has requested the UK to amend its current CFC legislation "to better take into account the rulings of the EU's Court of Justice" regarding the tax treatment of CFCs. The Commission is of the view that the UK is "still not complying with EU law" and that the UK "continues to tax in the UK profits of subsidiaries established in the EU or in Member States of the...EEA" but that under EU law the profits of CFCs should not be subject to additional tax in the country of the parent company where the subsidiaries are engaged in genuine economic activities.
The Commission's criticism of the UK's rules notes that the measures put in place are not a "sufficient response" to the ECJ's decisions in Cadbury Schweppes and the CFC GLO. The press release notes that the Commission sent its letter of formal notice to the UK on 22 March 2010 and that the UK sent an unsatisfactory reply to the Commission on 15 July 2010. By March 2010 HMRC and the HM Treasury had already issued a discussion document and held a stakeholder event on CFC reform. By July the consultation period had concluded, the June budget had announced full reform and the interim improvements and HMRC had met with the CFC Liaison committee.