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HMRC internal manual

International Manual

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Controlled Foreign Companies: The CFC Charge Gateway Chapter 5 - Non-trading finance profits: UK Activities: Significant People Functions (SPFs)

The 2010 Report on the Attribution of Profits to Permanent Establishments (“the Report”) sets out the principles of the authorised Organisation for Economic Co-operation and Development (OECD) approach (the AOA) in Part I, which also provides guidance on the practical application of these principles in a general sense. Part II of the Report specifically considers the banking sector and how the AOA applies to a number of situations often found where traditional banking business is carried on through a permanent establishment.

The most common situation to be considered under TIOPA10/S371EB will be that of a loan made by a CFC to another group company. Much of the guidance on functional and factual analysis of a traditional banking business at B-1 to B-3 of Part II of the Report will be useful in considering such loans, particularly where groups’ financing operations are complex. However the analysis always needs to be carried out in the context of the particular situation, which, for Chapter 5, will not be that of a bank lending to an unconnected customer.