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HMRC internal manual

Business Income Manual

Expansion of scope of Corporation Tax and Income tax: Permanent Establishment exemption

Section 18A (2A) CTA 2009 sets out how the Permanent Establishment exemption applies to a foreign Permanent Establishment carrying out a trade of dealing in or developing UK land.

Where a company makes an election for foreign Permanent Establishment exemption, profits from a company’s trade of dealing in or developing UK land will not benefit from exemption. This means the full amount of the profits or losses relating to the UK property trade should be taxed or allowed.

*Example *

UK resident Company X has a non UK Permanent Establishment (PE) which is developing a property in the UK. The PE has a total profit of 100 and 40 relates to the UK property trade.  For the purposes of PE exemption the 40 relating to the UK property trade should not be left out of account and should be taxed in the UK.