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HMRC internal manual

International Manual

HM Revenue & Customs
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Non-residents trading in the UK: introduction

Process map

In all cases where you are considering the potential chargeability of a non-resident you should consider the facts of the case in the process illustrated below. The relevant guidance for each stage of consideration is sign-posted accordingly. This chapter of the guidance concerns stage 1 of the process laid out below and covers the question of whether the non-resident’s trade is being carried out in the UK which is a requirement before the domestic charge is triggered. Where an enquiry into a non-resident is concerned stage 2 (the potential effects of any applicable treaty) and stage 4 (whether any tax liability can be collected) of the process should equally be under consideration from the outset.

Stage 1

Is there a charge under domestic legislation on the activities in question? If there is not, you need consider the case no further. [INTM261000 to INTM264110]

Stage 2

If the non-resident is a resident of a state with which we have a Double Taxation Agreement, does the treaty restrict the domestic charge? [INTM265010 to INTM266160]

Stage 3

How much are the chargeable profits that can be taxed in the UK? [INTM267010 to INTM267170]
Stage 4

Having established that there is a domestic charge and having taken account of the effects of the relevant treaty, how do we assess and collect any tax that is due? [INTM268010 to INTM268050]  

The concept of whether a non-resident is trading in the UK as distinct from with the UK, is fundamental to the question of taxation of the trading activities of non-residents in the UK. Whether considering income tax or corporation tax, trading in the UK is a prerequisite to the existence of a UK charge:

  • ITTOIA05/S6(2)- The profits of a trade, profession, or vocation carried on in the UK by a non-resident are chargeable to Income Tax.
  • CTA09/S5(2) - A company not resident in the UK is within the charge to corporation tax only if, it carries on a trade in the UK through a permanent establishment in the UK.

We therefore need to consider closely just what the concept of trading in the UK implies. Trade is a technical area with a wealth of case law, some relevant specifically in the context of whether a trade had been carried out in the UK.

Technical/specialist responsibility on whether particular activities amount to a trade belongs to CTIAA, Trading and Property Income with guidance atBIM20050+. The concept of trading by a non-resident goes a stage further by requiring consideration of whether the trade has been carried out in the UK. Where technical advice is required on the ‘in the UK’ aspect a submission should be made to Business International.