Approach in the PE host state

The assumption of S43(3)(b) is that the PE has such equity and loan capital as it would reasonably be expected to have if the equity and loan capital of the company were allocated between the company's foreign PEs and the rest of the company's business. TIOPA10/S43(5) provides that this is subject to the terms of the UK's double taxation convention with the PE's host country if it is a ‘full treaty territory’. The meaning of full treaty territory is given by CTA09/S18R within Chapter 3A, which provides for branch exemption (see INTM287060).