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HMRC internal manual

International Manual

Non-residents trading in the UK: domestic law permanent establishment/branch or agency

Branch or agency - statutory definition and practical recognition of a branch

Since references to ‘branch or agency’ in the non-resident company CT charging legislation at ICTA88/S11 were changed to ‘permanent establishment’ for accounting periods beginning after 1 January 2003, the term ‘branch or agency’ only remains relevant to non-residents chargeable to income tax. Although ITTOIA05/S6(2) under which non-residents are charged to income tax does not mention ‘branch or agency’, the machinery provisions for assessment and collection of tax atFA95/S126&Sch23 impose the non-resident’s liability on the UK branch or agency (see INTM268020.)

There is a statutory definition of ‘branch or agency’ at ICTA88/S834(1) thus -“any factorship, agency, receivership, branch or management”. This is not particularly helpful so we must look for authority elsewhere including case law.

Most people recognise a branch of a foreign business when they see one and the impression given to the public is helpful in deciding whether or not a branch exists. For example there are many branches of foreign banks that trade on the High Streets of many towns and cities in the UK. We know this, whether we bank with these branches or not, because the name of the foreign bank will be displayed across the shop front of the UK branch. The personnel running the UK branch will be carrying on the part of the foreign bank’s trade that takes place in the UK. This amounts to the UK presence of the foreign bank’s trade, i.e. a branch of its trade. That’s an easy example in part because banks actually call themselves branches but it is worth stressing that whatever terminology is used it is the activities carried on in the UK in relation to the foreign enterprise’s overall business activities that are most relevant in deciding whether the UK activities are a branch of the foreign business.