Venture capital schemes: permanent establishment
If your company wishes to use a venture capital scheme to encourage investment, it must meet the permanent establishment condition.
The venture capital schemes which must meet the permanent establishment condition include:
- the Enterprise Investment Scheme
- the Seed Enterprise Investment Scheme
- Social Investment Tax Relief
Your company will need to have a fixed place of business in the UK, through which your company’s business is wholly or partly carried on. In certain circumstances, having an agent in the UK will meet this requirement.
Fixed place of business
The critical part of whether you’re permanently established in the UK, is if the business carried out at that place forms an essential and substantial part of your business.
Examples which indicate you’re permanently established include having an office or factory, or one of the following:
- a place of management
- a branch
- a workshop
- a quarry, mine, oil or gas well
- a building site, such as a construction or installation project
This isn’t an exhaustive list, and the type of business your company carries out will be the deciding factor in what premises and facilities are required to meet the condition.
If you’re a holding company, the business of your trading subsidiaries doesn’t have to be carried on from your premises. The administrative and management functions of your company will likely be enough to count for the permanent establishment condition.
If you’re an overseas-registered parent company, you must have a permanent establishment in the UK yourself in order to qualify. You won’t be treated as having this merely by having a subsidiary which:
- is resident in the UK
- carries on its business there
Your company will have a permanent establishment in the UK if it has an agent:
- based in the UK
- who has the authority to enter into contracts on behalf of your company
- who frequently uses this authority to enter your company into binding agreements
These contracts must relate to the substantive business of your company rather than merely complementing it.
The following won’t count as your agent in the UK:
- independent agents, such as commission agents and brokers, who offer their agency services to you in pursuit of their own business
- employees who don’t have or use the authority to enter you into contracts