The legislation at CTA09/Part 2/Chapter 4 aims to recognise for UK tax purposes the commercial reality that a bank's business must be supported by an appropriate amount of capital and that this has a direct effect on the overall profitability of the business.

It sets out the basis on which the profits attributable to an UK permanent establishment (PE) of a non-resident company are to be determined. In particular, CTA09/S21(1) provides that the profits to be attributed are those that the PE would make if it were:

a separate entity in the UK,

engaged in the same or similar activities,

under the same or similar conditions, and

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