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The rules described in this article will not apply if different rules are included in the relevant double taxation agreement; in such a case the rules in the agreement take precedence.

The statutory definition of a bank (see D7.701)¹ is narrow and may not apply to deposit-takers and similar businesses. The profits of such other businesses are still to be determined in accordance with the 'separate enterprise principle' (see D4.118)².

Transfers of loans and other financial assets between the permanent establishment (PE) and any other part of the non-resident bank are only recognised if they would have taken place between independent enterprises. Such a transfer will only be recognised if it can reasonably be considered to be carried out for valid commercial reasons; obtaining a tax advantage is not a valid commercial reason³. Consequently, if the UK PE enters into a loan with a customer, the financial asset will be attributed to the UK along with any profits and losses arising from that asset. Any subsequent