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HMRC internal manual

General Insurance Manual

Non-resident insurers: scope of UK taxing rights: the corporation tax charge: accounting periods beginning on or after 1 January 2003: charge on profits

The charge to corporation tax was amended by FA03/S149 with effect for accounting periods beginning on or after 1 January 2003. This substituted and inserted sections 11(1) to 11(2A) and inserted a new section 11AA and Schedule A1 into ICTA88. Details of the changes are as follows and in GIM10123 and GIM10124.

Corporation tax is charged on the profits of a non-resident attributable to its ‘permanent establishment’ in the UK. The chargeable profits comprise

  • trading income arising directly or indirectly through or from the permanent establishment (ICTA88/S11 (2A)(a))
  • any other income from property or rights used by, or held by or for, the permanent establishment (including income falling within Case V of Schedule D) (ICTA88/S11 (2A)(b))
  • chargeable gains falling within TCGA92/S10B (ICTA88/S11 (2A)(c))


* on assets situated in the UK and used in or for the purposes of the trade at or before the time the gain accrued
* on assets situated in the UK and used or held for the purposes of the permanent establishment before that time, or on assets acquired for use by or for the purposes of the permanent establishment.The express exclusion for distributions that was in the old section 11(2) (see 

GIM10110) is not reproduced, as ICTA88/S208 applies to non-resident companies as it applies to resident companies.

The permanent establishment is treated as the tax representative of the company and is liable for the tax and to perform all necessary administrative functions such as making returns (FA03/S150 and ICTA88/SCHA1).

The FA 2003 legislation enacts explicitly into UK law the effect of Article 7 of the OECD Model, so any possible argument about the scope of Article 7 and that of section 11 is avoided. The discussion in GIM10115 on the implications for any non-resident general insurer whose head office is not in a treaty country remains valid.

For periods beginning on or after 1 January 2003, the balance of premiums, claims, expenses and provisions (the underwriting result) disclosed on the FSA return plainly falls within both section 11 and Article 7. The business disclosed in that return is therefore presumed to be business falling within section 11. In the case of an EEA insurer these figures will have to be obtained from whatever accounts and information are prepared by the company and submitted with its return. If nothing else is available, the details given by the company to its Home State regulator as UK branch business in its Article 44.2 Third Directive return is a starting point.

Special provision is made for the application to EEA insurers of the rules governing equalisation provisions, where no FSA return is made. See GIM7290.