CG42100 - Non-resident company with a UK permanent establishment
CTA09/S5 (2), TCGA92/S10B
If a company is not resident in the UK CTA09/S5 (2) says that it is not within the charge to Corporation Tax unless it carries on a trade in the UK through a permanent establishment.
Until 2003 the legislation referred to a UK branch or agency, the term that is still used for persons other than companies, see CG25500+. The term “permanent establishment” is used in double tax treaties and is defined at CTA10/S1141. For further guidance see INTM260000 onwards.
If a company carries on a trade in the UK through a permanent establishment it is liable to Corporation Tax on its chargeable profits. These are defined in CTA09/S19. Chargeable profits includes chargeable gains, which are defined by CTA09/S19(3)(c) as being gains falling within TCGA92/S10B. These are gains from assets
- situated in the UK and
- which at or before the time of the disposal of the asset have been
- used in or for the purposes of the trade, or
- used or held or acquired for the purposes of the branch or agency.
TCGA92/S10B (3)
Exemption under double taxation agreement
This scheme does not apply to any company which is exempt from Corporation Tax on the income of the permanent establishment because of a double taxation agreement. Such companies are also exempt from Corporation Tax on the gains related to that activity. The extent of double taxation relief is defined by TIOPA10/Part 2. For further guidance see INTM265000 onwards.
When charges arise
If a company is within the charge to Corporation Tax in respect of a trade carried on through a permanent establishment charges can arise
- on the disposal of assets which are or have been related to the permanent establishment activity
- on the happening of certain events giving rise to deemed disposals;
- the cessation of the permanent establishment activity, or
- the transfer outside the UK of assets related to the activity.
The cessation of use of an asset related to the permanent establishment activity is not itself an occasion of charge.
Guidance on gains arising from the disposal of assets is in CG42110 and CG42120. Guidance on the events giving rise to deemed disposals is in CG42130 and CG42140. CG42150 explains how to get help from specialist colleagues. CG42160 provides guidance on the alternative collection rights that are available if the non-resident company fails to pay Corporation Tax on chargeable gains.