Corporation Tax Act 2009 section 18P

Exclusions

Section 18P sets out two key exclusions that restrict the foreign permanent establishment exemption: one applying to small companies operating in territories without a full tax treaty, and another excluding chargeable gains from the exemption for close companies.

• Small companies can only claim the foreign permanent establishment exemption for territories that have a full double taxation treaty with the UK — profits or losses from permanent establishments in non-treaty territories are not eligible.
• Close companies cannot include profits derived from chargeable gains within their exempt foreign permanent establishment profits or losses.
• The close company restriction does not apply to chargeable gains on assets used exclusively for a trade carried on through the foreign permanent establishment.
• The close company restriction also does not apply to gains on disposals of foreign currency or certain debts representing money in use for the trade of the foreign permanent establishment.