Taxation (International and Other Provisions) Act 2010

[F1 43 Profits attributable to permanent establishments for purposes of section 42(2) U.K.

(1) This section applies in determining for the purposes of section 42(2) the amount of the profits of a UK resident company on which corporation tax is or would be chargeable that is attributable to a permanent establishment of the company in a territory outside the United Kingdom.

(2) The amount of the profits of the company that is attributable to the permanent establishment is the amount that the permanent establishment would have made if it were a distinct and separate enterprise which—

(a) engaged in the same or similar activities under the same or similar conditions, and

(b) dealt wholly independently with the company.

(3) In applying subsection (2) assume that—

(a) the permanent establishment has the same credit rating as the company, and

(b) (subject to subsection (5)) the permanent establishment has such equity and loan capital as it could reasonably be expected to have if the equity and loan capital of the company were allocated in accordance with subsection (4).

(4) The allocation is one made on a just and equitable basis between the permanent establishments in territories outside the United Kingdom through which the company carries on business and the entity that the company would consist of if each such permanent establishment were an entity distinct and separate from the company.

(5) If the permanent establishment is in a full treaty territory (within the meaning of Chapter 3A of Part 2 of CTA 2009) subsection (3)(b) has effect subject to the double taxation arrangements having effect in relation to the territory.

(6) Subsections (3)(b) to (5) prevail over any allotment of equity or loan capital to the permanent establishment made by the company.

(7) If the company is an insurance company F2 ... , in applying subsection (2) assume that the permanent establishment has such free assets as it would have in the circumstances described in that subsection.

(8) The Commissioners for Her Majesty's Revenue and Customs may by regulations make provision as to the meaning of “free assets” in subsection (7).]

Textual Amendments

F1 S. 43 substituted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 13 paras. 27, 31, 37

F2 Words in s. 43(7) omitted (17.7.2012) by virtue of Finance Act 2012 (c. 14), Sch. 16 para. 233