HMRC internal manual

International Manual

Company residence: when HMRC will not usually review residence: examples

Some examples

Examples 1 to 8 illustrate circumstances in which HMRC would not usually seek to establish that a company is UK resident for the purposes of S5/CTA09 (see INTM120010). Enquiries will still be undertaken if they are necessary in order to fulfil the UK’s obligations under a double taxation agreement. HMRC also reserves the right to enquire into any case in which arrangements appear to have been made to exploit these examples by, for example, creating the form of compliance without the substance. The exception is example 9 which illustrates a case where an enquiry may be necessary.

The following circumstances are assumed to be present in all the examples below;

  • the company is wholly owned by a UK headed group or a UK headed sub-group with a non-UK resident ultimate parent;
  • the company is incorporated outside the UK in a territory where it is considered to be resident for tax purposes by virtue of its incorporation there;
  • the country of incorporation and residence has a double taxation agreement with the UK which contains a residence tie-breaker (INTM120070);
  • the company is genuinely established in its territory of residence;
  • the company does not (except in the particular circumstances of examples 6 to 8) have investment business as its main business, and;
  • the central management and control of the business of the company is at least in part exercised at meetings of its board of directors.

Example 1

A company includes as a member of its board of directors a UK resident, all other members being resident in its territory of residence and elsewhere outside the UK. The company’s board of directors meets only outside the UK.

Example 2

A company has more than one UK based director on its board, but the majority of board members are based outside the UK in its territory of residence or elsewhere. The board meets only outside the UK.

Example 3

The minority UK based attendance in example 2 becomes a majority on an isolated occasion due to the unforeseen unavailability of one or more of the overseas based directors.

Example 4

The UK based directors in examples 1 and 2 do not travel to attend board meetings in person but habitually participate by electronic link from the UK.

Example 5

The board of directors in examples 1 and 2 hold the majority of its meetings in any one accounting period outside the UK but a small minority - no more than one or two - of the meetings are habitually held in the UK.

Example 6

A company has as its main business the holding of majority shareholdings in operating companies resident in its own territory of residence or region (which does not include the UK). Its board of directors meets both in its territory of incorporation and in the territories of incorporation of its subsidiaries. It includes on its board a minority of one or more UK based directors.

Example 7

The UK based directors in example 6 habitually participate in meetings by way of electronic link from the UK.

Example 8

The situation is the same as in examples 6 or 7 except that while the board holds the majority of its meetings in any one accounting period outside the UK, a small minority of the meetings (no more than one or two) are habitually held in the UK.

Example 9

The majority of directors habitually perform a significant part of their duties in the UK, merely leaving the UK to attend board meetings. HMRC may wish to examine all relevant factors in such a case to determine whether or not the company should be regarded as resident in the UK.