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HMRC internal manual

International Manual

Foreign Permanent Establishments of UK Companies: anti-diversion rule: Initial gateway filter - Chapter 3

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

Initial gateway filter - Chapter 3

TIOPA10/Part9A/CH3’s purpose is to exclude CFCs that have no UK diverted profits from the regime in a cost efficient manner. It does this by setting out conditions that must be met for each of the CFC Charge Gateway chapters to apply. If the conditions for a particular chapter to apply are not met, then there will be no chargeable profits arising from the chapter.

Chapter 3 is modified by CTA09/Part2/CH3A/S18HA for foreign PE exemption by omitting TIOPA10/Part9A/S371CA(10)(a) (which excludes the activities of a UK PE of the CFC from being relevant UK activities for the purposes of Chapter 3), S371CB(2) (which is a reference to Chapter 8 for the purposes of Chapter 5 which is not relevant to foreign PE exemption), S371CC and S371CD (which are references to exempt distribution income and holding companies which are not appropriate to foreign PE exemption), and S371CE (group treasury company rules which allow exemption from Chapter 6 and again are not appropriate to foreign PE exemption).

The detailed rules for the application of Chapter 3 can be found here.