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HMRC internal manual

International Manual

Non-residents trading in the UK: 'Machinery' provisions for assessment and collection via UK representatives: Introduction: What are the machinery provisions for assessment and collection?

Non-residents 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 mapped below. The relevant guidance for each stage of consideration is sign-posted accordingly. This chapter of the guidance concerns stage 4 and specifically considers the practical arrangements for assessing and collecting the UK tax liabilities of non-residents via their UK representatives. Although the process map below shows four distinct steps for considering non-residents, it is important to consider step 4 from the outset to gauge the practical prospect of recovering any liabilities that you may establish are due.

### 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  

Where it is established that there is a UK domestic charge to tax in respect of the non-resident (INTM262010) and that domestic charge to tax is not removed or affected by any applicable double tax treaty (INTM265010) then it is necessary to know how to secure payment of liabilities. Additionally a non-resident within the domestic charge to tax will have other obligations under the Taxes Acts including the making of returns. So a legal framework is necessary to ensure a practical means for the non-resident’s liabilities and obligations under the Taxes Acts to be met.

The machinery provisions at TIOPA10/S835E et seq (and repeated in ITA07/Chapters 2B and 2C) for income tax and at CTA10/S969 - 972 for corporation tax provide a practical means of taxing the non-resident by imposing the liabilities and obligations under the Taxes Acts on the non-resident’s ‘UK representative’. Prior to FA03 the provisions at FA95/S126 applied to corporation tax as well and although the provisions for income tax and those for corporation tax are now made separately, their effect and the obligations imposed upon the respective UK representatives of non-resident individuals and non-resident companies are broadly equivalent.

The following guidance will cover:

* Who can be the non-resident’s UK representative? INTM268020
* Extent of the UK representative’s liability? INTM268030
* What assessments should be raised and how is that done? INTM268040
* What other obligations does the UK representative have? INTM268050

The machinery provisions alone cannot create or extend a tax liability on the non-resident. There has to be a charge to tax in respect of the non-resident under the domestic provisions in the first place. The provisions work by treating the tax obligations and liabilities of the non-resident as though they were additionally the obligations and liabilities of the UK representative. This provides a practical assessment and collection mechanism for non-residents. Once either the non-resident or the UK representative has paid the liabilities both parties are treated as having met their liabilities.

Prior to accounting periods commencing after 31st March 1996 and for individuals prior to years of assessment 1996/7 the machinery provisions for both income tax and corporation tax were at TMA70/S78-TMA70/S85 and if you are concerned with liabilities for a pre-self assessment period the TMA70 provisions still apply. In most respects the FA95 provisions replicate the effect of the TMA70 provisions.