Corporation Tax Act 2010

Chapter 2 U.K. Permanent establishments

Modifications etc. (not altering text)

C1 Pt. 24 Ch. 2 applied by 2007 c. 3, s. 1007A (as inserted (with effect in accordance with Sch. 2 paras. 7(3), 8 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 2 para. 3(3); S.I. 2011/662, art. 2)

C2 Pt. 24 Ch. 2 applied by 2003 c. 1, s. 60I(2)(a) (as inserted (6.4.2021 for the tax year 2021-22 and subsequent tax years) by Finance Act 2020 (c. 14), Sch. 1 paras. 5, 24 (with Sch. 1 paras. 30-34))

General U.K.

[F1 1140A Introduction U.K.

(1) This Chapter applies for the purpose of determining when a company has a permanent establishment in a territory for the purposes of the Corporation Tax Acts.

(2) So far as provisions in this Chapter are in substantially the same terms as Article 5 of the Model Tax Convention on Income and on Capital approved by the OECD Council on 18 November 2025 they are to be read and given effect, so far as possible, in a way that is consistent with the OECD’s commentary on that Article, also approved by the OECD Council on that date.

(3) Any reference in subsection (2) to a document approved by the OECD Council is to that document as it may be amended or replaced from time to time.

(4) And any such document is to be read in accordance with any reservation, declaration or election made by the United Kingdom in relation to that document.

(5) The Treasury may by regulations make provision—

(a) for subsection (3) not to apply in relation to any specified amendment or replacement of a document referred to in subsection (2),

(b) about the effect of any provision of a document referred to in subsection (2) that has been amended or replaced on or after 26 November 2025 where that provision is elective (however expressed), and

(c) amending subsection (2) to add a reference to a further document published by the OECD.

“Specified” means specified in regulations.]

Textual Amendments

F1 S. 1140A inserted (for chargeable periods beginning on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 7 paras. 11, 30

1141 Permanent establishments of companies U.K.

(1) For the purposes of the Corporation 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

[F2 (b) a person acting on behalf of the company in the territory habitually concludes contracts, or habitually plays the principal role leading to the conclusion of contracts, that are routinely concluded without material modification by the company, and the contracts are—

(i) for the transfer of the ownership of, or for the granting of the right to use, property owned by the company or that the company has the right to use, or

(ii) for the provision of services by the company.]

(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, and

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

(3) Subsection (1) is subject to sections 1142 to 1144.

Textual Amendments

F2 S. 1141(1)(b) substituted (for chargeable periods beginning on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 7 paras. 12, 30

Modifications etc. (not altering text)

C3 S. 1141(1) modified (with effect in accordance with s. 116(1) of the amending Act) by Finance Act 2015 (c. 11), s. 114(1)

Circumstances where there is no permanent establishment U.K.

1142 Agent of independent status U.K.

(1) 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 the agent's business.

[F3 (1A) A person is not to be regarded for the purposes of subsection (1) as an agent of independent status in relation to a company where the person—

(a) is closely related to the company, and

(b) acts exclusively or almost exclusively on behalf of—

(i) the company, or

(ii) the company and other companies to which the person is closely related.

(1B) In subsection (1A), “closely related” has the meaning that it has in section 1143 (see subsection (2CA) of that section).]

(2) Sections 1145 to [F4 1150] [F5 modify the application of this section] in relation to transactions carried out on behalf of a non-UK resident company by a person in the United Kingdom acting as—

(a) a broker (section 1145), [F6 or]

(b) an investment manager (sections 1146 to 1150), F7 ...

F7 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F3 S. 1142(1A)(1B) inserted (for chargeable periods beginning on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 7 paras. 13(2), 30

F4 Word in s. 1142(2) substituted (for chargeable periods beginning on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 7 paras. 19(a), 30

F5 Words in s. 1142(2) substituted (for chargeable periods beginning on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 7 paras. 13(3)(a), 30

F6 Word in s. 1142(2)(a) inserted (for chargeable periods beginning on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 7 paras. 13(3)(b), 19(b), 30

F7 S. 1142(2)(c) and word omitted (for chargeable periods beginning on or after 1.1.2026) by virtue of Finance Act 2026 (c. 11), Sch. 7 paras. 13(3)(c), 19(c), 30

1143 Preparatory or auxiliary activities U.K.

(1) If the condition in subsection (2) is met, 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.

(2) The condition is that, in relation to the business of the company as a whole, the activities carried on are only of a preparatory or auxiliary character [F8 and are not part of a fragmented business operation].

[F9 (2A) Activities are “part of a fragmented business operation” if—

(a) they are carried on (whether at the same place or at different places in the same territory) by the company or a person closely related to the company,

(b) they constitute complementary functions that are part of a cohesive business operation, and

(c) subsection (2B) applies.

(2B) This subsection applies if—

(a) the overall activity resulting from the combination of the functions mentioned in subsection (2A)(b) is not activity that is only of a preparatory or auxiliary character, or

(b) the company or a person closely related to the company has a permanent establishment in the territory by reason of carrying on any of those functions.

(2C) A person who is not a company is to be treated for the purposes of subsection (2B)(b) as having a permanent establishment in a territory if, were the person a company, the person would have a permanent establishment in the territory.

[F10 (2CA) For the purposes of this section, one person (“A”) is closely related to another person (“B”) if, based on all the relevant facts and circumstances, A has control of B or A and B are under the control of the same persons, including if the 50% investment condition is met in relation to A and B.]

(2E) The 50% investment condition is met in relation to A and B if—

(a) A has a 50% investment in B (or vice versa), or

(b) a third person has a 50% investment in each of A and B,

and section 259ND of TIOPA 2010 (meaning of “50% investment”) applies for the purposes of determining whether a person has a “50% investment".]

(3) [F11 In this section] “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, and

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

Textual Amendments

F8 Words in s. 1143(2) inserted (with effect in accordance with s. 21(5)(6) of the amending Act) by Finance Act 2019 (c. 1), s. 21(2)

F9 S. 1143(2A)-(2E) inserted (with effect in accordance with s. 21(5)(6) of the amending Act) by Finance Act 2019 (c. 1), s. 21(3)

F10 S. 1143(2CA) substituted for s. 1143(2D) (for chargeable periods beginning on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 7 paras. 14, 30

F11 Words in s. 1143(3) substituted (with effect in accordance with s. 21(5)(6) of the amending Act) by Finance Act 2019 (c. 1), s. 21(4)

1144 Alternative finance arrangements U.K.

(1) Subsection (2) applies if alternative finance return is paid to a non-UK resident company.

(2) 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 alternative finance arrangements—

(a) by the other party to the arrangements, or

(b) by any other person acting for the company in relation to the arrangements.

(3) In subsection (1) “alternative finance return” means alternative finance return within the application of—

(a) section 564I, 564K or 564L(2) or (3) of ITA 2007, or

(b) section 511, 512 or 513(2) or (3) of CTA 2009.

(4) In subsection (2) the reference to “the alternative finance arrangements” is a reference to the alternative finance arrangements under which the alternative finance return mentioned in subsection (1) is paid.

Brokers U.K.

1145 The independent broker conditions U.K.

(1) This section applies if a transaction is carried out on behalf of a non-UK resident company in the course of the company's trade by a person in the United Kingdom acting as a broker.

(2) In relation to the transaction, the broker is regarded for the purposes of section 1142(1) as an agent of independent status acting in the ordinary course of the broker's business if (and only if) each of conditions A to D is met.

(3) Condition A is that at the time of the transaction the broker is carrying on the business of a broker.

(4) Condition B is that the transaction is carried out in the ordinary course of that business.

(5) Condition C is that the remuneration which the broker receives in respect of the transaction for the provision of the services of a broker to the non-UK resident company is not less than is customary for that class of business.

(6) Condition D is that the broker does not fall (apart from this subsection) to be treated as a permanent establishment of the non-UK resident company in relation to any other transaction of any kind carried out in the same accounting period of the non-UK resident company as the transaction in question.

Investment managers U.K.

1146 The independent investment manager conditions U.K.

(1) This section applies if an investment transaction is carried out on behalf of a non-UK resident company in the course of the company's trade by a person in the United Kingdom acting as an investment manager.

(2) In relation to the investment transaction, [F12 the circumstances in which] the investment manager is regarded for the purposes of section 1142(1) as an agent of independent status acting in the ordinary course of the investment manager's business [F13 include where each of the following conditions (the independent investment manager conditions) are met.]

(3) Condition A is that at the time of the transaction the investment manager is carrying on a business of providing investment management services.

(4) Condition B is that the transaction is carried out in the ordinary course of that business.

(5) Condition C is that, when the investment manager acts on behalf of the non-UK resident company in relation to the transaction, the relationship between them, having regard to its legal, financial and commercial characteristics, is a relationship between persons carrying on independent businesses dealing with each other at arm's length.

F14 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) Condition E is that the remuneration which the investment manager receives in respect of the transaction for the provision of investment management services to the non-UK resident company is not less than is customary for that class of business.

Textual Amendments

F12 Words in s. 1146(2) inserted (for chargeable periods beginning on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 7 paras. 15(a), 30

F13 Words in s. 1146(2) substituted (for chargeable periods beginning on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 7 paras. 15(b), 30

F14 S. 1146(6) omitted (for chargeable periods beginning on or after 1.1.2026) by virtue of Finance Act 2026 (c. 11), Sch. 7 paras. 16(1), 30

F15 1147 Investment managers: the 20% rule U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F15 S. 1147 omitted (for chargeable periods beginning on or after 1.1.2026) by virtue of Finance Act 2026 (c. 11), Sch. 7 paras. 16(2)(a), 30

F16 1148 Section 1147: interpretation U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F16 S. 1148 omitted (for chargeable periods beginning on or after 1.1.2026) by virtue of Finance Act 2026 (c. 11), Sch. 7 paras. 16(2)(b), 30

F17 1149 Application of 20% rule to collective investment schemes U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F17 S. 1149 omitted (for chargeable periods beginning on or after 1.1.2026) by virtue of Finance Act 2026 (c. 11), Sch. 7 paras. 16(2)(c), 30

[F18 1150 Meaning of “investment manager” and “investment transaction” U.K.

(1) The following definitions apply for the purposes of this Chapter.

(2) An “investment manager” means a person who provides investment management services (which may include or comprise the provision of investment advice).

(3) An “investment transaction” means any transaction other than a transaction with an excluded subject matter.

(4) The following are excluded subject matters—

(a) land in the United Kingdom, and

(b) any commodity or other physical asset.

(5) But a transaction is to be treated as not having an excluded subject matter if—

(a) it is a derivative contract whose subject matter is a commodity but which does not result in the physical delivery of the commodity, or

(b) it is a derivative contract whose subject matter is an excluded subject matter only because it operates by reference to a qualifying index, provided that index is not maintained by a person who is connected to any of the parties to the transaction.

(6) For the purposes of subsection (5) a “qualifying index” means an index relating to an excluded subject matter that—

(a) is publicly available, and

(b) is an index of a substantial number of assets.]

Textual Amendments

F18 S. 1150 substituted (for chargeable periods beginning on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 7 paras. 17(1), 30

Lloyd's agents U.K.

F19 1151 Lloyd's agents U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F19 S. 1151 omitted (for chargeable periods beginning on or after 1.1.2026) by virtue of Finance Act 2026 (c. 11), Sch. 7 paras. 20, 30

Supplementary U.K.

F20 1152 Investment managers: disregard of certain chargeable profits U.K.

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Textual Amendments

F20 S. 1152 omitted (for chargeable periods beginning on or after 1.1.2026) by virtue of Finance Act 2026 (c. 11), Sch. 7 paras. 18(1), 30

1153 Miscellaneous U.K.

(1) For the purposes of this Chapter a person is regarded as carrying out a transaction on behalf of another if the person—

(a) undertakes the transaction, whether on behalf of or to the account of the other, or

(b) gives instructions for it to be so carried out by another.

(2) In the case of a person who acts as a broker or investment manager as part only of a business, this Chapter has effect as if that part were a separate business.