Commentary on Sections Part 2: Charge to corporation tax: basic provisions Overview Section 21: The separate enterprise principle
124.This section sets out the basic rule of the separate enterprise principle. It is based on section 11AA(2) and (3) of, and paragraph 1(2) of Schedule A1 to, ICTA.
125.The terms “distinct and separate enterprise” and “credit rating” in this section are unique to section 11AA of ICTA. The former term is taken from Article 7 of the Model Treaty and the latter from the commentary on that article. The meaning of the former is well understood from its use in double taxation conventions while the latter takes its normal commercial meaning, a meaning that is well established through credit ratings given by agencies such as Moody’s or Standard and Poor.