Finance Act 2003

148 Meaning of “permanent establishment” U.K.

(1) For the purposes of the Tax Acts a company has a permanent establishment in a territory if, and only if—

(a) it has a fixed place of business there through which the business of the company is wholly or partly carried on, or

(b) an agent acting on behalf of the company has and habitually exercises there authority to do business on behalf of the company.

This general definition is subject to the following provisions.

(2) For this purpose a “fixed place of business” includes (without prejudice to the generality of that expression)—

(a) a place of management;

(b) a branch;

(c) an office;

(d) a factory;

(e) a workshop;

(f) an installation or structure for the exploration of natural resources;

(g) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources;

(h) a building site or construction or installation project.

(3) A company is not regarded as having a permanent establishment in a territory by reason of the fact that it carries on business there through an agent of independent status acting in the ordinary course of his business.

(4) A company is not regarded as having a permanent establishment in a territory by reason of the fact that—

(a) a fixed place of business is maintained there for the purpose of carrying on activities for the company, or

(b) an agent carries on activities there for and on behalf of the company,

if, in relation to the business of the company as a whole, the activities carried on are only of a preparatory or auxiliary character.

(5) For this purpose “activities of a preparatory or auxiliary character” include (without prejudice to the generality of that expression)—

(a) the use of facilities for the purpose of storage, display or delivery of goods or merchandise belonging to the company;

(b) the maintenance of a stock of goods or merchandise belonging to the company for the purpose of storage, display or delivery;

(c) the maintenance of a stock of goods or merchandise belonging to the company for the purpose of processing by another person;

(d) purchasing goods or merchandise, or collecting information, for the company.

[F1 (5A) Where alternative finance return as defined by subsection (5) of section 47 of the Finance Act 2005 is paid to a company that is not resident in the United Kingdom, the company is not regarded as having a permanent establishment in the United Kingdom merely by virtue of anything done for the purposes of the arrangements falling within that section by the other party to the arrangements or by any other person acting for the company in relation to the arrangements.]

[F2 (5B) Where profit share return is paid, in accordance with arrangements to which section 49A of FA 2005 applies (alternative finance arrangements: profit share agency), to a company that is not resident in the United Kingdom, the company is not regarded as having a permanent establishment in the United Kingdom merely by virtue of anything done for the purposes of the arrangements by the other party to the arrangements or by any other person acting for the company in relation to the arrangements.]

(6) In section 832(1) of the Taxes Act 1988 (interpretation of the Tax Acts), at the appropriate place insert—

““permanent establishment”, in relation to a company, has the meaning given by section 148 of the Finance Act 2003;”.

(7) In section 288(1) of the Taxation of Chargeable Gains Act 1992 (c. 12) (interpretation), at the appropriate place insert—

““permanent establishment”, in relation to a company, has the meaning given by section 148 of the Finance Act 2003;”.

Textual Amendments

F1 S. 148(5A) inserted (with effect in accordance with s. 56 of the amending Act) by Finance Act 2005 (c. 7), s. 48(2)

F2 S. 148(5B) inserted (19.7.2006) by Finance Act 2006 (c. 25), s. 95(9)