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HMRC internal manual

International Manual

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HM Revenue & Customs
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Foreign Permanent Establishments of UK Companies: anti-diversion rule: Introduction for relevant accounting periods beginning on or after 1 January 2013.

This applies for relevant accounting periods beginning on or after 1 January 2013.

FA12/Sch20/Part2 aligns the foreign PE exemption regime with the controlled foreign companies (CFC) regime that applies for CFC’s accounting periods beginning on or after 1 January 2013. This is achieved by amending the foreign PE rules in CTA09/Part2/CH3A; in particular by replacing the anti-diversion rules in CTA09/S18H, S18G and S18I with a new anti-diversion rule. The CFC rules are anti-avoidance provisions in that they aim to prevent the diversion of corporate profits from the UK into low tax territories. In order to ensure that any such diversion is not achieved via foreign PE exemption instead of CFCs, the CFC anti-diversion rules are adapted so as to also apply to foreign PEs.

CTA09/S18G, S18H and S18I adapt and apply the CFC Charge Gateway and entity exemptions. The adaptions enable the CFC Charge Gateway and entity exemptions to be applied to foreign PEs of UK companies. For relevant periods which begin before 1 January 2013, the previous anti-diversion rules apply. The relevant guidance in respect of those rules can be found at INTM286000 et seq.