INTM286010 - Foreign Permanent Establishments of UK Companies: anti-diversion rule: introduction

Overview

The provisions at CTA09/S18G, in conjunction with the motive test at S18H, aim to protect the UK tax base from activities which artificially divert profits from the UK. The section works by taking the adjusted relevant profits amount to be nil. The adjusted relevant profits amount is defined at S18G(3) as the relevant profits amount (S18A(6)) calculated without reference to chargeable gains / allowable losses. So as with the CFC legislation, the focus of the anti-diversion rule is on income not on chargeable gains.

The above ensures that no adjusted relevant profits amount is deemed to be exempt (subject to S18I), where it can be shown that the lower level of tax test is met for the relevant accounting period, subject to a de minimis rule, a motive test and certain transitional provisions (see INTM286070).