Finance Act 2011

26 (1) This paragraph applies for the purposes of Step 2 in paragraph 24(1). U.K.

(2) The assets of the permanent establishment are those which it would have were it 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 relevant foreign bank.

(3) For this purpose, any relevant provisions of sections 21 to 28 of CTA 2009 are to be applied as they would be applied in determining profits attributable to the permanent establishment for corporation tax purposes.

(4) But where paragraph 24(1) is being applied in determining the UK allocated equity and liabilities of a relevant foreign bank for the purposes of paragraph 17(17) or 19(17), any assets within sub-paragraph (5) are to be left out.

(5) The assets within this sub-paragraph are any assets of the permanent establishment (as otherwise determined under this paragraph) representing an excluded loan relationship.

(6) A loan relationship is “excluded” if—

(a) the relevant foreign bank is the creditor,

(b) the debtor (“D”) is a UK resident bank or another relevant foreign bank—

(i) which is a member of the relevant group, and

(ii) whose activities include the relevant regulated activity described in the provision mentioned in paragraph 79(a),

(c) the money which is the subject of the transaction giving rise to D's debt is money borrowed by the relevant foreign bank from another entity, and

(d) in borrowing that money the relevant foreign bank was acting as the agent or intermediary of D.

(7) Section 302(1) of CTA 2009 (definition of “loan relationship”) applies for the purposes of sub-paragraphs (5) and (6) as it applies for corporation tax purposes.