Capital Allowances Act 2001 section 431A

Foreign permanent establishment exemption

Section 431A explains how mineral extraction allowances interact with the foreign permanent establishment exemption, so that where a company has elected for that exemption, its overseas mineral extraction activities are ring-fenced as a separate, non-taxable trade.

• Where a company has elected under CTA 2009 section 18A for the foreign permanent establishment exemption, and it carries on a trade that includes working a source of mineral deposits, special rules apply.
• The part of the trade carried on through one or more permanent establishments outside the United Kingdom is treated as a separate trade from any other trade of the company.
• All profits and gains from that separated overseas trade are treated as not chargeable to UK tax (or, if there were any such profits, they would not be chargeable).
• The effect is that mineral extraction allowances under this Part of the Act are calculated independently for the overseas permanent establishment activities, preventing them from generating allowances that reduce taxable UK profits.