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HMRC internal manual

International Manual

HM Revenue & Customs
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UK residents with foreign income or gains: certificates of residence: Dual resident companies

A company which is a resident of the UK (on the basis of being incorporated in the UK or being centrally managed and controlled in the UK, see INTM120030) may also be resident of another state according to the domestic law of that other state. If so, it will be regarded as dual resident (INTM120100).

If a company is dual resident and the UK has a Double Taxation Agreement (‘DTA’) with the other state, residence may be awarded to that other state by virtue of a tie-breaker. The standard tie-breaker awards residence to the state where the place of effective management is carried out, although some DTAs include other tie-breakers such as awarding residence to the state as agreed by the Competent Authorities (INTM120070).

If residence is awarded to another state by virtue of a DTA tie-breaker, that company will be regarded as non-resident for the purposes of the UK Corporation Taxes Acts and thus for the purpose of all DTAs with the UK (CTA09/S18(2)). Such a company would therefore be referred to as Treaty Non-Resident (TNR). However, until a treaty tie-breaker has been applied, a dual resident company will remain a resident of the UK for UK tax purposes. Note also that a claim for the tie-breaker to be invoked is deemed to be made under CTA09/S18(4) if one is not actually made in respect of the company.

If an Officer receives a request from a company which they suspect is dual resident, they may need to ask for further information to consider whether the company is TNR.

For example, if an Officer has good reasons to believe that a UK incorporated company might be effectively managed outside the UK (for example, because the directors are non-resident or appear to be acting as nominees on behalf of non-residents), the Officer may consider asking the company to explain where its place of effective management is and confirm whether any other state regards it as a resident of theirs.

If HMRC have reasonable grounds for believing that a company is TNR, we may refuse to certify residence (at least until the customer has provided us with sufficient information to give us comfort that residence wouldn’t be awarded to another state).

Each case has to be viewed on its own merits. If we strongly suspect that residence should be awarded to another state, we may decide to contact that other state before certifying residence (to confirm whether they regard it as resident under their domestic law and whether they think the tie-breaker would award residence to them).

Alternatively, we may issue the Certificate of Residence but, at the same time, make a spontaneous exchange of information with the other state and let them decide whether to challenge the residency issue and/or whether to grant benefits under the DTA.

However, any such contact with other states for these purposes would have to be made through the Competent Authority. As such, in those cases where an Officer believes there is a strong risk that a company is TNR, referrals should be made to CTISA Business International, Foreign Profits Team. (This content has been withheld because of exemptions in the Freedom of Information Act 2000) INTM162170(This content has been withheld because of exemptions in the Freedom of Information Act 2000)