(1)The profits of the non-UK resident company that are attributable to the permanent establishment are those that the establishment would have made if it were a distinct and separate enterprise which—
(a)engaged in the same or similar activities under the same or similar conditions, and
(b)dealt wholly independently with the non-UK resident company.
(2)In applying subsection (1) assume that—
(a)the permanent establishment has the same credit rating as the non-UK resident company, and
(b)the permanent establishment has such equity and loan capital as it could reasonably be expected to have in the circumstances specified in that subsection.
(3)In sections 22 to 28 the principle in subsection (1) (read with subsection (2)) is called “the separate enterprise principle”.
In accordance with the separate enterprise principle, transactions between the permanent establishment and any other part of the non-UK resident company are treated as taking place on such terms as would have been agreed between parties dealing at arm's length.
(1)This section applies if the non-UK resident company provides the permanent establishment with goods or services.
(2)If the goods or services are of a kind that the company supplies, in the ordinary course of its business, to third parties dealing with it at arm's length, the matter is dealt with as a transaction to which the separate enterprise principle applies.
(3)If not, the matter is dealt with as an expense incurred by the non-UK resident company for the purposes of the permanent establishment (see section 29).
(1)The Commissioners for Her Majesty's Revenue and Customs may by regulations make provision about the application of section 21(1) to insurance companies.
(2)The regulations may, in particular, make provision in place of section 21(2)(b) as to the basis on which, in the case of insurance companies, capital is to be attributed to a permanent establishment in the United Kingdom.
(3)In this section “insurance company” has the meaning given by section 431(2) of ICTA.