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HMRC internal manual

Business Income Manual

Expansion of territorial scope of Corporation Tax and Income tax: 16th March 2016 amendment of UK/Crown Dependencies double taxation agreements

The UK’s double taxation agreements with the Crown Dependencies (Jersey, Guernsey & Isle of Man) were amended on the 16th March 2016. Prior to the change in the double taxation agreements a company could only be chargeable on the profits of a trade in the UK if that trade was carried out through a UK permanent establishment.  From the date of amendment any resident of the Crown Dependencies carrying on a trade of dealing in or developing land in the UK other than through a permanent establishment is liable to income tax in the UK on the profits of that trade.

Corporate entities resident in the Crown Dependencies who carry on a trade in the UK in dealing or developing UK land other than through a UK permanent establishment are liable to income tax on the profits of that trade from the 16th March 2016 until the 5th July 2016 when the changes to the Finance Bill 2016 have effect to tax the profits from these trades to corporation tax.

Example

Company A is resident in Jersey and is the owner of an ongoing UK property development. Company A has determined to its own satisfaction that it does not have a UK permanent establishment and has not filed any UK corporation tax returns on this basis. On 16th March 2016 Company A determines that it carries out a trade in the UK otherwise than through a UK permanent establishment. Company A is required to file a UK income tax return for a period from the 16th March 2016 until the 5th July 2016 when all the profits of Company A’s trade in dealing or developing UK land falls within the charge to corporation tax.