INTM264435 - Non-residents trading in the UK: permanent establishment: domestic and treaty law: fixed place of business

The following examples look at scenarios where employees of overseas businesses take advantage of increased flexibility and mobility in their working conditions to spend blocks of time working in the UK. This guidance focuses on the impact of the fixed place of business permanent establishment rules on these scenarios. In each case, a business would have to separately consider whether the trigger for a dependent agent PE may be met on the same facts and circumstances.

These examples are focused on corporation tax and therefore the personal or indirect tax consequences are not addressed here.

Example 1:

Juan, who works for a foreign entity in State D, comes to Brighton on holiday and stays on to work here for a total of 40 calendar days including his holiday, using the office of a UK affiliate company as a base. He enjoys the experience so much he decides to do the same thing six months later.

Under such an arrangement, Juan’s presence would not create a fixed place of business permanent establishment because, irrespective of any other conditions, the permanence test would not be met. However, if this arrangement was expected to be an annual occurrence for Juan and/or his successors or colleagues in his team, the business may have to consider whether the cumulative time spent in the UK could trigger a permanent establishment.

Example 2:

Francine, a French national with an English partner, joins a French company on a permanent contract which permits her to spend a fixed three-month period each year working in the UK.

Under such an arrangement, Francine’s presence would meet the permanence test for a fixed place of business permanent establishment because the cumulative time she is anticipated to spend in the UK over the coming few years is significant and her presence in the UK is fixed and so not random or sporadic. Whether a PE would be created would depend on the wider facts and circumstances.

Example 3:

Alexei, Luca and Sara all work for a foreign entity in State C. They come to the UK on holiday for the same part of the year with their families, staying at different addresses. They are all permitted to stay on an additional 30 days to work in the UK by their employer, using the office of a UK affiliate company as a base. Under such an arrangement, their presence would not create a fixed place of business permanent establishment because, irrespective of any other conditions, the permanence test would not be met.

Example 4:

Company T has a team of staff in its Zurich office. Over the course of nine months, six staff are permitted to spend six weeks each, in turn, at an affiliate company’s office in London working on a project. This scenario would meet the permanence test for a fixed place of business permanent establishment because the changing identity of the visiting personnel doesn’t affect the continuity of Company T’s presence in the UK.

Example 5:

Jasmine, who works for a company based in the UK, is seconded to cover six months of maternity leave for a related foreign company in State E. She does this remotely from her UK office and her home in London. This will not automatically be exempted from triggering a fixed place of business PE of that related foreign company in the UK and the facts will have to be examined as usual in determining if a PE is triggered.