Taxation (International and Other Provisions) Act 2010 section 43

Profits attributable to permanent establishment for purposes of section 42(2)

Section 43 sets out how to calculate the amount of a UK resident company's profits that are attributable to its permanent establishment in a territory outside the United Kingdom, for the purposes of the double taxation credit relief limit.

• Profits attributable to an overseas permanent establishment are calculated on an arm's length basis, as if the establishment were a distinct and separate enterprise dealing independently with the company.
• The permanent establishment is assumed to share the company's credit rating and to hold a just and equitable share of the company's equity and loan capital, allocated across all its overseas permanent establishments and the residual entity.
• Where the permanent establishment is in a territory covered by a full double taxation treaty, the capital attribution rules are subject to the terms of that treaty, and the statutory allocation overrides any capital allocation actually made by the company.
• If the company is an insurance company, the permanent establishment is also assumed to hold an appropriate level of free assets, with HMRC having the power to define "free assets" by regulations.