HMRC internal manual

International Manual

Non-residents trading in the UK: Treaty permanent establishment: potential effect on UK domestic charge

Effect of double tax treaty

Part of the proper consideration of a non-resident trading in the UK is to consider the effect that the terms of any applicable double tax treaty have on the domestic charge to tax on the non-resident entity. The treaty could potentially vary or even remove the charge to tax. There can be no charge to tax on a non-resident in the UK if the terms of the UK domestic charging provisions are not met because a treaty cannot create a charge to tax where none exists under domestic legislation. But the terms of double tax treaties apply over and above domestic legislation by virtue of TIOPA10/S2 (formerly ICTA88/S788(1)). That could be particularly relevant for non-residents trading in a territory through a treaty permanent establishment if any domestic legislation definition of permanent establishment varied from the relevant treaty definition.