Taxation in the United Kingdom/Legislation/Section 11AA of the Income and Corporation Taxes Act 1988

This section provides for determining for the purposes of corporation tax the amount of the profits attributable to a permanent establishment in the United Kingdom of a company that is not resident in the United Kingdom ("the non-resident company"). There shall be attributed to the permanent establishment the profits it would have made if it were a distinct and separate enterprise, engaged in the same or similar activities under the same or similar conditions, dealing wholly independently with the non-resident company.

It is assumed that the permanent establishment has the same credit rating as the non-resident company, and that the permanent establishment has such equity and loan capital as it could reasonably be expected to have in the circumstances specified in that subsection. No deduction may be made in respect of costs in excess of those that would have been incurred on those assumptions.

Deductions are allowed for allowable expenses incurred for the purposes of the permanent establishment, including executive and general administrative expenses so incurred, whether in the United Kingdom or elsewhere. For these purposes "allowable expenses" means expenses of a kind in respect of which a deduction would be allowed for corporation tax purposes if incurred by a company resident in the United Kingdom.

The Board of HM Revenue and Customs may by regulations make additional provision concerning how to apply the rules for insurance companies.

This section also introduces Schedule A1 to the Act.