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HMRC internal manual

International Manual

Foreign Permanent Establishments of UK Companies: anti-diversion rule: Initial gateway filter - Does Chapter 6 apply?

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

Does Chapter 6 apply?

TIOPA10/Part 9A/CH 6 (trading finance profits) applies for a company’s accounting period only if Company X (INTM286320) has trading finance profits and at any time during the accounting period it has funds or other assets derived directly or indirectly from UK connected capital contributions. Trading finance profits are defined in TIOPA10/Part 9A/S371VG(4) they are profits arising from loan relationships, derivative contracts or company distributions that are included in a trade profits computation.

UK connected capital contributions are defined at S371VA and are any capital contribution made (directly or indirectly) by a UK resident connected company to Company X (whether in relation to an issue of shares or otherwise). A capital contribution can be in kind or in cash and can involve the issuance of shares or not. However, it will not include a situation where a liability to repay the capital contribution (e.g. by recognising a loan or other future obligation) arises when it is made, provided the contribution gives rise to taxable credits for the UK resident company that made it.