Paragraph 19 Compensating adjustments

in the heading, at the end insert “etc”,

after subsection (1) insert—

“(1A)

Subsection (2) also applies in any case where—

(a)

one of the affected persons is a non-UK resident company with a permanent establishment in the United Kingdom,

(b)

the taxable profits of that company are calculated, as a result of section 21 of CTA 2009, as if the arm’s length provision (to some extent) had been made or imposed between the permanent establishment and the other affected person, and

(c)

if the actual provision (to the extent corresponding to the arm’s length provision treated as made or imposed between the permanent establishment and the other person) had been made or imposed between the permanent establishment and the other person, that provision—

(i)

would confer a potential advantage on the non-UK resident company in relation to United Kingdom taxation, and

(ii)

would not confer a potential advantage on the other person in relation to United Kingdom taxation.

(1B)

For the purposes of applying that subsection in such a case—

(a)

the permanent establishment is to be regarded as “the advantaged person”,

(b)

the other affected person is to be regarded as the “disadvantaged person”,

(c)

the reference to the arm’s length provision is to that provision to the extent it is treated as having been made or imposed between the permanent establishment and the other affected person for the purpose of calculating the profits of the non-UK resident company, and

(d)

the reference to the actual provision is to that provision to the extent that it as corresponds to the arm’s length provision treated as having been made or imposed between the permanent establishment and the other affected person for that purpose.”