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HMRC internal manual

Bank Levy Manual

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HM Revenue & Customs
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Chargeable equity and liabilities: relevant foreign banks: attribution of chargeable equity and liabilities to a branch: determining 'B' the assets of the UK branch (step 2): separate enterprise principle and CATA

Sections 25 - 28 CTA 2009

Sections 25 - 28 CTA 2009 set out how the separate enterprise principle applies specifically to banks. Banks trade in money rather than goods. As a result, as well as needing funds for capital purposes, they rely on access to funds in the form of money as an integral part of their trading activities. That money comes both from investors and customers who place funds with the banks.

The FSA does not require a foreign bank to allot an amount of capital to its UK branch. For tax purposes, however, the separate enterprise principle requires the UK branch to be attributed the same level of equity and loan capital as it would require if it were trading as a distinct and separate enterprise. The equity that is attributed to the UK branch will often displace debt for the purposes of computing its profits. This adjustment is often referred to as the capital attribution tax adjustment or ‘CATA’.

The CATA is the starting point for determining the chargeable equity and liabilities of a UK branch as the first step in this process requires the assets of the UK branch to be determined under sections 21 - 28 CTA 2009.