Commentary

D4.119 Determination of profits—non-resident banks with a UK PE

Corporate tax
Corporate tax | Commentary

D4.119 Determination of profits—non-resident banks with a UK PE

Corporate tax | Commentary

D4.119 Determination of profits—non-resident banks with a UK PE

The rules described in this article will not apply if different rules are included in the relevant double taxation agreement; in such a case the rules in the agreement take precedence.

The statutory definition of a bank (see D7.701)1 is narrow and may not apply to deposit-takers and similar businesses. The profits of such other businesses are still to be determined in accordance with the 'separate enterprise principle' (see D4.118)2.

Transfers of loans and other financial assets between the permanent establishment (PE) and any other part of the non-resident bank are only recognised if they would have taken place between independent enterprises. Such a transfer will only be recognised if it can reasonably be considered to be carried out for valid commercial reasons; obtaining a tax advantage is not a valid commercial reason3. Consequently, if the UK PE enters into a loan with a customer, the financial asset will be attributed to the UK along with any profits and losses arising from that asset. Any subsequent transfer of the asset to another part of the same entity will not normally be

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