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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
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Foreign permanent establishments of UK companies: chargeable gains

Where a UK resident company has a foreign permanent establishment an election can be made under CTA09/S18A. An election excludes profits (or losses) attributable to a foreign permanent establishment of a UK resident company (“PE”) from the corporation tax computation.

In general the provisions of CTA 09/S18A apply to gains and losses computed for the purpose of corporation tax on chargeable gains in a similar way as they do to other profits or losses attributable to a permanent establishment. They are to be “left out of account” to the extent that the State in which the PE is situated may exercise taxing rights in accordance with the relevant treaty. A gain that is left out of account is to that extent not a chargeable gain. Similarly a loss that is left out of account is to that extent not an allowable loss.

S18A is optional. It has no effect unless a company elects for it to apply, but an election for S18A to take effect is permanent and affects all the PEs of a company. See the International Manual INTM281020 for more information about the form and effect of the election.

A company that has opted into branch exemption should prepare a computation of all its gains and losses in the same way as it would have done for credit relief.

Further guidance on the treatment of chargeable gains and losses, where an election has been made can be found in the International Manual:

  • Introduction INTM282010
  • Immovable property INTM282020
  • Attribution of assets and gains INTM282030
  • Determining exempt gains and losses INTM282040
  • Foreign gains or loss in earlier period INTM282050
  • No gain. no loss transfers INTM282060
  • Exclusion of gains of close companies INTM282070

Relief for replacement of business assets INTM282080