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HMRC internal manual

International Manual

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Non-residents trading in the UK: 'Machinery' provisions for assessment and collection via UK representatives: Who can be the non-resident's UK representative?

 

The legislation

This defines the ‘UK representative’ of a non-resident as:

For income tax [ITA07/S835E] - the UK branch or agency (INTM264090) through which the non-resident individual or company carries on any trade (or profession or vocation).

For corporation tax [CTA10/S969] - the permanent establishment (INTM264050) through which a non-resident company carries on a UK trade.

Subject to some exemptions (see Who cannot be a UK representative below) the machinery provisions allow you to treat any permanent establishment / branch or agency in the UK through which the non-resident carries on any trade, profession or vocation as the non-resident’s UK representative. This applies whether the UK branch or agency activities are carried out solely, in partnership or by a company.

The guidance at INTM264020, INTM264060 and INTM264070 explains that part of the requirements of the charging provisions to either income tax or corporation tax in respect of a non-resident is that there is some level of personal representation of the non-resident’s trade within the UK. This is a necessary feature of either a ‘permanent establishment’ or a ‘branch or agency’. Any personnel acting in the UK branch or any agent acting for the non-resident would fulfil the representative role and be competent to be the non-resident’s ‘UK representative’ under the machinery provisions. It matters not whether the UK personnel have the status of employee, consultant etc, or indeed whether they are self-employed or not. The important factor is that the personnel act in the non-resident’s trade in the UK. The machinery provisions are framed in terms of the permanent establishment / branch or agency as a whole being the UK representative. Further guidance on the practicalities of how assessments should be made and addressed is at INTM268040.

Partnerships can be the UK representative of a non-resident

A partner in a partnership can be the UK representative of a non-resident. This will occur, for example, where a non-resident trades in the UK though the agency of a UK partnership (of which he or she is not a member). In such circumstances, the partners in the UK partnership will be jointly liable, as UK representative, for the tax payable by the non-resident. This provision is at ITA07/S835E and TIOPA10/S835E for income tax and is implicit in CTA10/S969 for corporation tax.

Where a business that is carried on by a partnership that includes non-resident partners is carried on in the UK through a permanent establishment / branch or agency, the permanent establishment / branch or agency is the UK representative of each non-resident partner. This provision is at ITA07/S835F and TIOPA10/S835F for income tax and is implicit in CTA10/S969 for corporation tax.

Where a business is carried on in the UK by a partnership that includes both resident and non-resident partners, the partnership is treated as the UK representative of each non-resident partner. The partners are thus jointly liable for the tax payable by the non-resident partners on their shares of the partnership profit. This provision is at ITA07/S835F and TIOPA10/S835F for income tax and is implicit in CTA10/S969 for corporation tax.

Who cannot be a UK representative

Certain persons, although they represent the non-resident in his business in the UK, are exempt (under TIOPA10 SCH6 Paragraphs 20 - 22 and 30 - 32 (old FA95/SCH23/PARAS4-6) for income tax or CTA10/S971 (old FA03/S150(4) and (6)) for corporation tax) from having all the non-resident’s obligations and liabilities imposed upon them. Or their responsibilities, e.g. under HMRC information powers, are limited in accordance with their competence to act for the non-resident. Broadly these are agents of independent status acting in the ordinary course of their own business, these factors being considered by reference to the agent’s legal, economic and commercial independence from the non-resident. See the guidance at INTM264080 for practical interpretation of these factors.

TIOPA10/Sch6 paragraphs 5-9 and ITA07/SS835G-835K (old FA95/S127(1)) lists the persons who cannot be the UK representative for income tax and capital gains tax:

  1. Agents who are not regular agents. In general if a non-resident is trading in the UK through an agent that agent should be regarded as a regular agent. This was considered in the cases of Neilsen Andersen & Co v Collins and Tarn v Scanlan (13TC121-2) when Scrutton LJ considered “the contrast intended to be drawn is between casual employment, temporary employment, for a transaction or few transactions, and regular appointment of a permanent agent who is there as representing the foreigner”.

It may be less clear whether an agent is a regular agent when he acts for his principal in only one transaction. This was the issue in the case of Willson v Hooker 67TC585. Acting for an Isle of Man company, Mr Willson instructed a firm of surveyors to bid for some land in the UK and instructed solicitors concerning the purchase and sale of the land. The Court said that a regular agency is any agency that is not a casual or occasional agency and that it was impossible to regard Mr Willson as a casual or occasional agent. He was the person through whom all the transactions of the company in the UK were carried out in the relevant period. There was nothing casual about the arrangement.

  1. Additionally, in some circumstances, there are exemptions from UK representative status for brokers, investment managers and members’ agents and managing agents of syndicates at Lloyds. These exemptions are described in detail at INTM269000 and apply also for corporation tax.
  2. The counter-party to, and anyone acting for, the non-resident in relation to alternative finance arrangements under FA05/S47 or S49A.