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HMRC internal manual

International Manual

Non-residents trading in the UK: through UK investment managers, brokers or Lloyd’s agents: Limit to Income Tax charge on non-residents

Effect of statutory provisions

The statutory provisions are at:

  • ITA07/S811-814 for individuals and corporate trustees; and
  • ITA07/S815-816 for companies (other than corporate trustees).

They work by limiting the income tax chargeable on non-residents in line with the accepted principles of international taxation in the OECD Model Tax Convention and double taxation agreements between the UK and other countries.

In summary, the effect of the provisions is that income tax chargeable on non-residents in respect of

  • most types of investment and pension income (except income from UK property); and
  • income from trading in the UK through a qualifying broker or investment manager
  • is limited to the tax, if any, deducted at source.

The limitation does not apply, however, to income in relation to which the non-resident has a UK representative or income chargeable to income tax as profits of a Lloyd’s underwriting business.

The limitation does not apply to non-resident trusts if a current or potential beneficiary is either an individual ordinarily resident or a company resident in the UK.

The non-resident’s total liability to income tax is limited to the sum of:

  • the tax which would be due on the non-resident’s total income if no personal allowances were given and any “disregarded income” (see below) were ignored; and
  • the tax deducted at source (or treated as so deducted) from, and any tax credits in respect of, the “disregarded income”.

“Disregarded income” is income listed in ITA07/S813, S814 and S816 and defined at ITA07/S825-828, and includes:

  • dividends and stock dividends from UK companies;
  • interest;
  • purchased life annuity payments;
  • profits from deeply discounted securities;
  • distributions from some unit trusts;
  • transactions in deposits;
  • some annual payments;
  • most pension and social security income; and
  • income from transactions carried out through a broker or investment manager, where the independent broker conditions are met or the Investment Manager Exemption (IME) applies (see INTM269010 onwards).