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HMRC internal manual

Double Taxation Relief Manual

Non-residents: UK income: Small companies' relief

A permanent establishment of a foreign company in the United Kingdom is not resident in the United Kingdom, so that it would not be entitled to the small companies relief since ICTA88/S13 only provides this relief to companies resident in the United Kingdom. The non- discrimination Article however requires that the taxation of a permanent establishment in the United Kingdom of an enterprise of a resident of the agreement country is not to be less favourably levied than the taxation of a United Kingdom enterprise carrying on the same activities. A United Kingdom enterprise is one which, in the case of a company, is carried on by a company resident in the United Kingdom and it is with such an enterprise that the permanent establishment of the foreign enterprise has to be compared. If appropriate, the permanent establishment of the foreign enterprise will be entitled to the small companies’ relief. In determining what relief is due, the income and the profits of the company should include not only the income and profits of the permanent establishment, but also the income and profits of the company as a whole including other branches whether in the United Kingdom or elsewhere. The number of any associated companies, wherever resident, should also be taken into account (Section 13 (3) (b)).