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HMRC internal manual

International Manual

Foreign banks trading in the UK through permanent establishments: Introduction

Banks can operate in the UK in several ways:

  • UK subsidiary
  • permanent establishment (PE) in the UK
  • representative office in the UK

UK subsidiary

Where business is carried on through a separate UK company, be it UK owned or foreign owned, it will generally be UK resident and subject to UK tax on all its profits. As with any other multinational enterprises there may be transfer pricing, thin capitalisation and controlled foreign company issues. The application of these particular areas of legislation is covered in detail elsewhere in the International Manual and are touched on only briefly in this section.

Permanent establishment in the UK

Where a foreign bank operates in the UK through a permanent establishment you should consider both the legislation introduced in FA03 (INTM267705) and the relevant Double Taxation Agreement (INTM267626).

The transfer pricing legislation in TIOPA10/Part 4 (previously ICTA88/SCH28AA) may also be relevant if a foreign bank enters into transactions with associated companies through a PE.

Representative office

If a foreign bank only operates in the UK through a representative office then it will generally not be taxable in the UK (INTM267650).