Corporation Tax Act 2009 section 516

Treatment of principal under profit sharing agency arrangements

Section 516 determines how profits are allocated for corporation tax purposes between the principal (depositor) and the agent (deposit-taker) under profit sharing agency arrangements.

• The principal (depositor) is not treated as entitled to the share of profits that belongs to the agent (deposit-taker) under the arrangement
• The agent (deposit-taker) is treated as entitled to both its own retained profit and the depositor's share of profit
• The deposit-taker is therefore taxable on the full amount of profit generated from the use of the deposited money
• The deposit-taker can claim relief for the portion of profit that it pays to the depositor as their share