INTM554050 - Hybrids: transfers by UK permanent establishment of a multinational company (Chapter 6): conditions to be satisfied: condition C

Condition C of s259FA TIOPA 2010 is satisfied if, disregarding the provisions of Chapters 6 to 10 of Part 6A, it is reasonable to suppose that those circumstances do not result in either (1)

  • an increase in taxable profits of the company for any permitted taxable period, or
  • a reduction of a loss made by the company for any permitted taxable period,

for the purposes of tax charged in the parent jurisdiction, or

  • the circumstances result in an increase in profits or a reduction of a loss for one or more permitted taxable periods, but the aggregate effect on taxable profits is less than the PE deduction

»Ê¹ÚÌåÓýapp aggregate effect on taxable profits is the sum of

  • any increases in taxable profits of the company for the purposes of the parent jurisdiction which are related to the PE deduction and
  • the amount of any reduction of a loss made by the company

For the purposes of 259FA (6) Condition C and 259FA(7) any increase in taxable profits or reduction in losses is to be ignored in any case where tax is charged at a nil rate under the law of the parent jurisdiction � effective from 1 January 2018.

When calculating the aggregate effect on taxable profits, you should take into account only the figures for a permitted taxable period that are in relation to a tax charged in the parent jurisdiction.

»Ê¹ÚÌåÓýapp aim is to establish whether the company has reflected a corresponding taxable receipt equal to the amount of the deduction claimed.

A permitted taxable period is a taxable period of the company for the purposes of a tax charged under the law of the parent jurisdiction, that

  • begins before the end of 12 months after the end of the accounting period in which the PE deduction falls for the purposes of corporation tax in the UK, or
  • where the period begins after that
    • (i) claim has been made for the period to be a permitted period in relation to the amount of ordinary income, and
    • (ii) is just and reasonable for the circumstances giving rise to the PE deduction to affect the profits or loss made for that period rather than an earlier period