IEIM721020 - Residence and UK Nexus

An intermediary will have to make a report to HMRC if it meets any of the following conditions:

  • It is resident in the UK,
  • has its place of management in the UK,

  • has a branch or office in the UK through which it carries out the activities that makes it an intermediary in respect to the arrangement or structure,
  • it is incorporated in the UK.

If the intermediary does not have this UK nexus (if it does not meet any of the conditions above) then there is no need for the intermediary to report even if the reportable taxpayer is UK resident (the reportable taxpayer may still have a reporting obligation).

One of the criteria is that the intermediary is resident in the UK. Under the definition in the Model Rules an intermediary is a “person” and this includes both a legal and a natural person. Residence is not further defined in rule 2.1 of the OECD rules, and that approach is reflected in the regulations. The word ‘resident’ will take its usual meaning in the context of direct tax legislation. Accordingly, HMRC’s view is that an individual is resident in the UK if they are resident here for income tax purposes, and a company is resident in the UK if it is resident here for corporation tax purposes.

The term “place of management” will take its natural ordinary meaning. The Model Rules closely align the term residence with place of management. (Rule 2.1(b) “is resident or has its place of management in the reporting jurisdiction) Therefore if the intermediary is “not resident for the purposes of income tax or corporation tax” then the UK nexus would still apply if there is a significant level of management function with the UK, specifically with the design or assistance on an CRS avoidance arrangement or an Offshore Opaque Structure.