Part 7Income tax, corporation tax and capital gains tax: general
Taxation of non-resident companies and related matters
148Meaning of “permanent establishment”
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.
F25A
Where alternative finance return F13within section 47(6) or (7), 47A(5), 48B(1) or 49A(2) of the Finance Act 2005 or section 511, 512 or 513(2) or (3) of the Corporation Tax Act 2009 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 F14the alternative finance arrangements in question by the other party to the arrangements or by any other person acting for the company in relation to the arrangements.
F155B
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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;
149Non-resident companies: basis of charge to corporation tax
F231
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F232
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F233
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4
After section 10A of the Taxation of Chargeable Gains Act 1992 (c. 12) insert—
10BNon-resident company with United Kingdom permanent establishment
1
Subject to any exceptions provided by this Act, the chargeable profits for the purposes of corporation tax of a company not resident in the United Kingdom but carrying on a trade in the United Kingdom through a permanent establishment there include chargeable gains accruing to the company on the disposal of—
a
assets situated in the United Kingdom and used in or for the purposes of the trade at or before the time the gain accrued, or
b
assets situated in the United Kingdom and used or held for the purposes of the permanent establishment at or before the time the gain accrued or acquired for use by or for the purposes of the permanent establishment.
2
Subsection (1) does not apply unless the disposal is made at a time when the company is carrying on a trade in the United Kingdom through a permanent establishment there.
3
This section does not apply to a company that, by virtue of Part 18 of the Taxes Act (double taxation relief arrangements), is exempt from corporation tax for the chargeable period in respect of the profits of the permanent establishment.
4
In this section “trade” has the meaning given by section 6(4)(b) of the Taxes Act.
5
In section 834(1) of the Taxes Act 1988 (interpretation of the Corporation Tax Acts), at the appropriate place insert—
“chargeable profits”, in relation to a company that is not resident in the United Kingdom—
a
for corporation tax purposes generally, has the meaning given by section 11(2), and
b
for the purposes of Chapter 4 of Part 17 (controlled foreign companies), has the meaning given by section 747(6);
6
This section has effect in relation to accounting periods (of the non-resident company) beginning on or after 1st January 2003, and regulations under section 11AA(5) of the Taxes Act 1988 (inserted by subsection (2) above) may be made so as to have effect from that date.
150Non-resident companies: assessment, collection and recovery of corporation tax
1
The enactments relating to corporation tax, so far as they make provision for or in connection with the assessment, collection and recovery of tax, or of interest on tax, have effect, in accordance with this section, as if the obligations and liabilities of a non-resident company were also obligations and liabilities of its UK representative.
2
For this purpose a permanent establishment in the United Kingdom through which a non-resident company carries on a trade—
a
is the UK representative of the company in relation to chargeable profits of the company attributable to that establishment,
b
continues to be the company’s UK representative in relation to those profits even after ceasing to be a permanent establishment through which the company carries on a trade, and
c
shall be treated, if it would not otherwise be so treated, as a distinct and separate person from the non-resident company.
As to the chargeable profits attributable to a permanent establishment, see F17section 19 of the Corporation Tax Act 2009.
3
Subject to the following provisions of this section—
a
the discharge by the UK representative of a non-resident company, or by the company itself, of an obligation or liability that corresponds to one to which the other is subject discharges the corresponding obligation or liability of the other, and
b
a non-resident company is bound, as if they were its own, by acts or omissions of its UK representative in the discharge of the obligations and liabilities imposed on the representative by this section.
4
An obligation or liability attaching to a non-resident company—
a
by reason of its having been given or served with a notice or other document, or
b
by reason of its having received a request or demand,
does not also attach to its UK representative unless the notice or document, or a copy of it, has been given to or served on the representative or, as the case may be, unless the representative has been notified of the request or demand.
5
A non-resident company is not bound by mistakes in information provided by its UK representative in pursuance of an obligation imposed on the representative by this section, unless the mistake is the result of an act or omission of the company itself, or to which the company consented or in which it connived.
6
The UK representative of a non-resident company is not by virtue of this section liable to be proceeded against for a criminal offence unless the representative committed the offence itself, or consented to or connived in its commission.
7
In this section—
“enactment” includes an enactment contained in subordinate legislation within the meaning of the Interpretation Act 1978 (c. 30);
“information” includes anything contained in a return, self-assessment, account, statement or report required to be provided to the Board or any officer of the Board;
“non-resident company” means a company that is not resident in the United Kingdom
F18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F167A
In this section references to carrying on a trade include holding an office.
8
This section has effect for accounting periods (of the non-resident company) beginning on or after 1st January 2003.
F5151Non-resident companies: extent of charge to income tax
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152Non-resident companies: transactions carried out through broker, investment manager or Lloyd’s agent
F111
Schedule 26 to this Act contains provisions supplementing—
a
section 148(3) (meaning of “permanent establishment”: not to include independent agent), F6...
F6b
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as regards transactions carried out through a broker, investment manager or Lloyd’s agent.
F122
Schedule 26 also contains provision about disregarding profits of certain investment transactions carried out on behalf of non-resident companies when attributing profits under F24Chapter 4 of Part 2 of the Corporation Tax Act 2009.
153General replacement of references to branch or agency of company
1
In the following provisions (which relate only to companies) for “branch or agency” or “branches or agencies”, wherever occurring, substitute “
permanent establishment
”
or “
permanent establishments
”
.
The provisions are—
a
in the Taxes Act 1988, sections F19..., F7... 402(3B), 403E(1)(a), (2), (4), (5) and (6), 442(1), 444BB(3)(b), F1..., 748A(1)(c) and (2), 790(6A)(b), 801(1A)(b), 804A(1)(a), 806L(1), (2), (4), and (5), 806M(2) to (5) and 815A(6); in Schedule 15, paragraphs 17(3)(c) and 25(2)(c); F10... in Schedule 24, paragraphs 1 and 8; and in Schedule 25, paragraphs 6(2A) and (2C), 8 and 11(3);
b
in the Taxation of Chargeable Gains Act 1992 (c. 12), sections 140(1), 140C(1)(a), 173(3)(b), 175(1A)(b), 185(4) and 213(5A);
F9c
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d
in the Capital Allowances Act 2001 (c. 2), sections 560(2) and 561(1)(c);
F21e
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2
In the following provisions (which relate to companies and other persons), any reference to a branch or agency shall be read, in relation to a company, as a reference to a permanent establishment.
The provisions are—
a
b
in the Taxation of Chargeable Gains Act 1992, sections 25(2), (3) and (5), 80(4)(a) and (b) and (7)(b), 199(2) and (4) and 276(7);
c
in the Finance Act 1999 (c. 16), section 85(2)(a);
F22d
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3
Any reference to a branch or agency—
a
in subordinate legislation made under an enactment contained in the Tax Acts or relating to chargeable gains, or
b
that is to be construed as having the same meaning as in any such enactment,
shall be read, in relation to a company, as a reference to a permanent establishment.
“Subordinate legislation” here has the same meaning as in the Interpretation Act 1978 (c. 30).
4
This section has effect in relation to accounting periods beginning on or after 1st January 2003.
154Double taxation relief: profits attributable to overseas permanent establishment
1
In Part 18 of the Taxes Act 1988 (double taxation relief), section 797 (limits on credit: corporation tax) is amended as follows.
2
In subsection (1) for “subsections (2) and (3)” substitute “
the following provisions of this section
”
.
3
In subsection (2) for “subsection (3)” substitute “
subsections (2A) and (3)
”
.
4
After subsection (2) insert—
2A
The provisions of section 11AA (profits attributable to permanent establishment), and of any regulations made under that section, apply, with the necessary modifications, in determining for the purposes of this section how much of the chargeable profits of a company resident in the United Kingdom is attributable to a permanent establishment of the company outside the United Kingdom.
5
The amendments in this section have effect in relation to accounting periods beginning on or after 1st January 2003.
155Consequential amendments
1
Schedule 27 to this Act provides for amendments consequential on the provisions of sections 148 to 153.
2
The amendments made by that Schedule have effect in relation to accounting periods beginning on or after 1st January 2003.
156Overseas life insurance companies
1
The enactments relating to corporation tax have effect in relation to overseas life insurance companies subject to such modifications and exceptions as the Treasury may prescribe by regulations.
2
The power to make regulations under this section includes power to make provision in place of, and in consequence to repeal or revoke, all or any of the enactments relating to corporation tax that on the passing of this Act make provision in relation to overseas life insurance companies.
3
Regulations under this section—
a
may make different provision for different cases, and
b
may make such consequential amendments of other enactments as appear to the Treasury to be necessary or expedient.
F34
Regulations under this section may be made so as to have effect in relation to accounting periods or periods of account (whenever beginning) which end on or after the day on which the regulations come into force.
5
In this section—
“enactment” includes an enactment contained in subordinate legislation within the meaning of the Interpretation Act 1978 (c. 30), and
“overseas life insurance company” means an insurance company (as defined in section 431(2) of the Taxes Act 1988) that is not resident in the United Kingdom but carrying on life assurance business (as so defined) through a permanent establishment in the United Kingdom.