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HMRC internal manual

International Manual

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

Agency - Common law concept

Practical experience will have introduced all of us to the idea of agency. We do not always deal directly with the principal because we sometimes deal with an intermediary or agent. The agent represents the principal in accordance with the terms of the agreement in place between them. That agreement may be oral or in writing and in legal terms is called the agent’s authority. In representing the principal the agent may bring about a legal relationship between that principal and a third party. Typically the agent may conclude a contract on the principal’s behalf with a third party - the common situation is that of the UK agent who makes a contract with an UK third party to sell some goods on behalf of a foreign principal.

The English common law concept of agency is sometimes described by legal writers as the doctrine of identity. This conveys the concept that the agent is the alter ego of the principal. In the act of the agent we see directly the act of the principal; we regard what the agent does for the principal in just the same way as we would have regarded the same act if the principal had been here and had done it. If a contract for sale were made in the UK it would follow that a non- resident making a contract here through an agent would be trading here. Thus our domestic law concept of trading within the UK by non-residents and our common law concept of agency are intimately linked although the word agent appears nowhere in the income tax charging legislation. This contrasts with the legal position under civil law, which is detailed in the guidance at INTM266160.