Corporation Tax Act 2009 section 23

Provision of goods or services for permanent establishment

Section 23 sets out how to treat goods or services that a non-UK resident company provides to its own permanent establishment in the UK.

• Where a non-UK resident company provides goods or services to its UK permanent establishment, special rules determine the tax treatment.
• If the goods or services are the same kind that the company normally sells to independent third parties at arm's length prices, the transaction is treated as if it were a deal between two separate enterprises (the separate enterprise principle).
• If the goods or services are not of a kind normally sold to third parties at arm's length, the cost is simply treated as an expense incurred by the non-UK resident company for the purposes of the permanent establishment, and dealt with under the allowable deductions rules in section 29.
• The distinction matters because the separate enterprise principle requires the transaction to be priced as though the permanent establishment were an independent business, whereas the expense route simply allows the actual cost incurred.