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HMRC internal manual

International Manual

Non-residents trading in the UK: domestic charging provisions: UK legislation

Charging provisions

The Income Tax charge applies to a non-resident person if they exercise a trade in the UK. That person could be an individual or a company. ITTOIA05/S6(2) is the Income Tax charging provision. It applies to any person, whether individual, partner, or company. The flowchart at INTM264030 describes the situations in which a non-resident will be charged to either IT or CT. Further guidance on the Income Tax charging provisions can be found at INTM262030 

The Corporation Tax charge applies to a non-resident company if it trades in the UK through a permanent establishment (CTA09/S5(2)). Further guidance on the Corporation Tax charging provisions can be found at INTM262040.

The general scheme of Corporation Tax is stated at CTA09/S5 to S8 starting with the plain statement that a company shall be chargeable to CT on all its profits wherever arising. The initial test for a non-resident company with activities in the UK should be to consider whether the company is chargeable to Corporation Tax under CTA09/S19. Where the non-resident company is within the charge to CT there cannot also or alternatively be a charge to income tax under ITTOIA05/S6(2) because that is prevented by CTA09/S3(1)(b). But where a non-resident company, which carries on a trade in the UK, is not chargeable under CTA09/S19, possibly because unusually its activities in the UK are not conducted through a permanent establishment, it will still be chargeable to income tax under ITTOIA05/S6(2). The limit of liability to basic rate Income Tax does not apply to the tax on that trading income. Where this is the case, the possibility of separate CGT liabilities on the non-resident company should not be overlooked. Further guidance on CGT in this context is at INTM267170.

As far as ‘trading in the UK’ is concerned, the general guidance on whether a person’s (whether resident or non-resident) activities actually constitute trading is at BIM20050+. This non-residents guidance concentrates on whether the non-resident’s trade has been carried out in the UK. If the non-resident company’s activities in the UK do not amount to trading there is no charge to Corporation Tax. There is a distinction between trading in the UK and trading with the UK. Trading by non-residents with the UK, as opposed to in the UK, (e.g. purchases or delivery) does not bring the non-resident within the UK domestic charging provisions.