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HMRC internal manual

International Manual

Foreign Permanent Establishments of UK Companies: anti-diversion rule: Chapter 6.

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

Chapter 6.

TIOPA10/Part 9A/CH6 considers whether a CFC with trading finance profits is overcapitalised and is generally applicable to banking or insurance business. If overcapitalisation is as a result of capital contributions from UK connected companies then the resultant profits will pass through the CFC Charge Gateway. Trading finance profits can fall within chapter 6 if two factors are present, firstly the entity holds free capital or (in the case of an insurance business) holds free assets greater than it would be expected to hold if it were not controlled by any other company and secondly that there are UK connected capital contributions. Chapter 6 is not modified for the purposes of foreign PE exemption and so the rules in this Chapter are applied to the total profits of Company X (INTM286320) in order to identify any profits that pass through the Diverted Profits Gateway

The detailed rules for the application of Chapter 6 can be found here: