INTM267706 - The attribution of capital to foreign banking permanent establishments in the UK: The approach in determining an adjustment to funding costs - overview of the five steps
It should be noted that a required adjustment to funding costs is purely a computational one for tax purposes and has no effect on the way in which a UK permanent establishment (PE) conducts or funds its actual business - see INTM267705.
It may be helpful to consider the approach in terms of five distinct steps
Step 1
Determine the assets attributable to the PE [INTM267707]
Step 2
Risk weight those assets [INTM267710]
Step 3
Determine the equity capital that the PE would require if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions [INTM267760]
Step 4
Determine the loan capital that such an enterprise would have had if it had the equity capital determined under step 3 [INTM267770]
Step 5
Determine the capital attribution tax adjustment to be made, based on the difference between the PE바카라 사이트™s actual funding costs on the combined amount representing the equity and loan capital determined under steps 3 and 4 and the notional funding costs (which will include a rate of nil in respect of the equity capital) to be taken into account under CTA09/Part 2/Chapter 4 [INTM267780]