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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Non-resident company with a UK permanent establishment: non-payment by non-resident company


If a non-resident company does not pay the tax in respect of its gains on permanent establishment assets alternative collection arrangements may apply. They apply where

  • a chargeable gain has accrued to a company which is not resident in the United Kingdom and
  • the gain formed part of its chargeable profits for Corporation Tax purposes by virtue of TCGA92/S10B and
  • any of the Corporation Tax assessed on the company for the accounting period in which the gain accrued is not paid within six months of the time when it becomes payable.

TCGA92/S190 (4)

The Board may serve a notice enabling alternative collection rights to be enforced. This notice must be served within three years of the date on which the amount of Corporation Tax payable for the accounting period is finally determined (TCGA92/S190 (7)). It must be served on one of the persons specified below and include the information listed below.

TCGA92/S190 (3)

Where the company was part of a group when the gain accrued the Board may serve a notice on

  • the principal company of the group at that time, or
  • any other group company.

The power to serve a notice on any group company other than the principal is limited to companies

  • that were a member of the group in the 12 months before the time that the gain accrued and
  • during that same period owned the asset disposed of.

For this purpose owning the asset includes owning any part of the asset or, where the asset is an interest in or right over another asset, owning either of the assets, or a part of either of the assets.

In other cases the Board may serve a notice on

  • any person who is or was within the period of 12 months before the time at which the gain accrued a controlling director of the company, or
  • any person who is or was within that period a controlling director of a company which has, or within the relevant period had, control of the company.

TCGA92/S190 (4) and (5)

The notice must

  • state the amount of Corporation Tax which remains unpaid for the accounting period in which the gain accrued, and the date when it became payable
  • require the person to pay the relevant amount within 30 days of the service of the notice.

The relevant amount is the lesser of

  • the amount which remains unpaid of the Corporation Tax assessed on the company for the accounting period in which the gain accrued and
  • an amount equal to Corporation Tax on the amount of chargeable gain at the rate in force when the gain accrued.

Strictly, `the rate in force’ means the main rate of Corporation Tax where there is more than one rate. Where the company is liable at the small profits rate on some or all of the gain, that should be taken into account in determining the relevant amount.

TCGA92/S190 (6) and (11)

If a person is required to pay an amount by a notice under TCGA92/S190 it may be recovered from that person as if it were tax due and duly demanded from him. The payer is entitled to recover any amount paid from the company.

TCGA92/S190 (12)

The person required to pay an amount by a notice under TCGA92/S190 is not entitled to any deduction for any amount paid as a result of that notice for the purposes of computing any income, profits or losses for any tax purpose.

Obtaining advice

You may receive information from Debt Management and Banking that tax is unpaid in a case where the alternative collection arrangements could be applied. If there is plenty of time before the time limit is due to expire you should bring the existence of these provisions to the attention of the non-resident company and request that it makes the appropriate payment.

If this does not lead to payment being made, or if the time limit is approaching, a short report should be submitted to Specialist PT Capital Gains Technical Group. This should state from whom you consider the tax may be recoverable and, unless time limit considerations prevent you from obtaining that person’s papers, should be accompanied by both the papers for the non-resident company and those of the possible alternative payer. As the notice must be issued by the Commissioners of HM Revenue & Customs you can take no further action at this stage.