What is a UK permanent establishment?

Coronavirus (COVID-19): For information on the inadvertent creation of permanent establishments as a result of the coronavirus pandemic, see Q&A: Coronavirus (COVID-19)—what is the impact of the coronavirus-related restrictions on corporate tax residence and permanent establishments? and Practice Note: Coronavirus (COVID-19)—tax implications—HMRC guidance on UK corporate tax residence and UK permanent establishments.

This Practice Note looks at the meaning of a permanent establishment (PE) for tax purposes, both under UK domestic law and in double tax treaties.

The UK tax treatment of a non-UK resident company largely depends on whether it has a PE in the UK. It is therefore important to be able to identify the point at which a non-resident company's presence in the UK will amount to a PE.

A non-resident company trading in the UK through a PE will be chargeable to UK corporation tax. A non-resident company that has a UK PE that is not trading (for instance, an establishment that holds intellectual property as an investment) may be chargeable to income tax. There are special rules for companies that hold UK land or buildings. For more details on the significance of whether a non-resident company has a PE, see Practice Note: When does the UK tax non-resident companies?

A non-UK resident company that operates in the UK, and that has taken active steps to avoid creating a taxable