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HMRC internal manual

Company Taxation Manual

Residence: non-resident companies: ‘charges received’: income from which income tax has been deducted

If a non-resident company trading in the UK through a permanent establishment/branch or agency (see INTM264090) receives what used to be called a ‘charge’ on income (income from which IT has been deducted by the payer - see CTM09005), the gross payment is income in its hands and is chargeable to CT and not to IT so far as it falls within the chargeable profits of the company (CTM34210). The rules governing set-off of any IT borne against the CT liability are at CTA10/S968. Taxed income in this context might include, for example, patent royalties received by a manufacturing concern, or interest on the reserve fund investments of the UK branch of a foreign bank.

A ‘charge’ received by a non-UK resident company which does not fall within the previous paragraph will, subject to the provisions of any relevant Double Taxation Agreement, be within the charge to IT, so far as it arises in the UK.