DT1954 - Non-residents: UK income: Small profits rate and marginal relief
A permanent establishment of a foreign company in the
United Kingdom is not resident in the United Kingdom. Therefore, it would not be entitled to the small profits rate of corporation tax or marginal relief since CTA10/s18A only
provides that companies
resident in the United Kingdom are entitled to the
small profits rate. The non- discrimination Article however requires
that the taxation of a permanent establishment in the United Kingdom of an
enterprise of a resident of the agreement country is not to be less favourably
levied than the taxation of a United Kingdom enterprise carrying on the same
activities. A United Kingdom enterprise is one which, in the case of a company,
is carried on by a company resident in the United Kingdom and it is with such
an enterprise that the permanent establishment of the foreign enterprise has to
be compared. If appropriate, the permanent establishment of the foreign
enterprise will be entitled to the small profits rate
or marginal relief. In determining whether the small profits rate or marginal relief applies, the income and the profits of the company should
include not only the income and profits of the permanent establishment, but
also the income and profits of the company as a whole including other branches
whether in the United Kingdom or elsewhere. The number of any associated
companies, wherever resident, should also be taken into account (Section 18E CTA 2010).