Corporation Tax Act 2009 (c. 4)

Part 2 U.K. Charge to corporation tax: basic provisions

Chapter 4 U.K. Non-UK resident companies: chargeable profits

The separate enterprise principle U.K.

21 The separate enterprise principle U.K.

(1) The profits of the non-UK resident company that are attributable to the permanent establishment are those that the 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 non-UK resident company.

(2) In applying subsection (1) assume that—

(a) the permanent establishment has the same credit rating as the non-UK resident company, and

(b) the permanent establishment has such equity and loan capital as it could reasonably be expected to have in the circumstances specified in that subsection.

(3) In sections 22 to 28 the principle in subsection (1) (read with subsection (2)) is called “the separate enterprise principle”.

Modifications etc. (not altering text)

C1 Ss. 21-28 applied (19.7.2011) by Finance Act 2011 (c. 11), Sch. 19 para. 26(3)

22 Transactions treated as being on arm's length terms U.K.

In accordance with the separate enterprise principle, transactions between the permanent establishment and any other part of the non-UK resident company are treated as taking place on such terms as would have been agreed between parties dealing at arm's length.

Modifications etc. (not altering text)

C1 Ss. 21-28 applied (19.7.2011) by Finance Act 2011 (c. 11), Sch. 19 para. 26(3)

23 Provision of goods or services for permanent establishment U.K.

(1) This section applies if the non-UK resident company provides the permanent establishment with goods or services.

(2) If the goods or services are of a kind that the company supplies, in the ordinary course of its business, to third parties dealing with it at arm's length, the matter is dealt with as a transaction to which the separate enterprise principle applies.

(3) If not, the matter is dealt with as an expense incurred by the non-UK resident company for the purposes of the permanent establishment (see section 29).

Modifications etc. (not altering text)

C1 Ss. 21-28 applied (19.7.2011) by Finance Act 2011 (c. 11), Sch. 19 para. 26(3)

[F1 24 Application to insurance companies U.K.

(1) This section makes provision in a case where the non-UK resident company mentioned in subsection (1) of section 21 is an insurance company.

(2) In accordance with the principle in that subsection, the permanent establishment is treated as holding—

(a) the same or a similar quantity of assets, and

(b) assets of the same or similar description,

as would have been held by a distinct and separate enterprise acting as mentioned in paragraphs (a) and (b) of that subsection.

(3) The assets which the permanent establishment is treated as holding in accordance with the principle in that subsection may include a proportion of assets held by the company.

(4) Nothing in subsection (2) or (3) is to be read as preventing the application of similar principles to those provided for by that subsection in a case where the non-UK resident company mentioned in section 21(1) is not an insurance company.

(5) The Commissioners for Her Majesty's Revenue and Customs may by regulations make other provision about the application of section 21(1) in a case where the non-UK resident company mentioned there is an insurance company.

(6) The regulations may, in particular, make provision in place of section 21(2)(b) as to the basis on which, in the case of an insurance company, capital is to be attributed to a permanent establishment in the United Kingdom.]

Textual Amendments

F1 S. 24 substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 138

Modifications etc. (not altering text)

C1 Ss. 21-28 applied (19.7.2011) by Finance Act 2011 (c. 11), Sch. 19 para. 26(3)