Permanent establishment

Produced by Tolley in association with Anne Fairpo

The following Corporation Tax guidance note Produced by Tolley in association with Anne Fairpo provides comprehensive and up to date tax information covering:

  • Permanent establishment
  • Introduction
  • Definition of permanent establishment
  • Fixed place of business
  • Place where the business is carried on
  • Dependent agent
  • Preparatory and auxiliary activities
  • E-commerce
  • Calculation of profits and losses
  • Further reading

Permanent establishment


A company that is not resident in the UK will only be subject to UK corporation tax if it carries on a trade in the UK through a permanent establishment. Where it does so, it will be subject to UK corporation tax on all profits that are attributable to the UK permanent establishment. There are exceptions to this rule for any person:

  1. dealing in and developing UK land ― see the Transactions in UK land guidance note for further information

  2. directly or indirectly disposing of UK land ― see the Overview of the rules on disposals of interests in UK land by non-residents guidance note

  3. that generates profits from a UK property business, provided they arise on or after 6 April 2020 ― see the Non-resident landlords scheme (NRLS) guidance note

CTA 2009, s 5(2)

This guidance note outlines when an overseas company will have a permanent establishment in the UK and how to calculate the profits attributable to that permanent establishment.

The same principles may apply when determining whether a UK company has a permanent establishment in another country.

In any case, where a double tax treaty is in place, this will typically provide that a UK company is only subject to tax in another country if it has a permanent establishment there. Most of the UK’s double tax treaties follow the Organisation for Economic Co-operation and Development (OECD) model tax treaty and the definition of permanent establishment is therefore the same as the UK definition.

HMRC has published supplementary guidance in light of the coronavirus outbreak. The OECD has also published an analysis of tax treaties and the impact of the COVID-19 crisis.

Special rules exist for companies operating in the offshore oil and gas sector. For more information on the impact of coronavirus, see the Company residence and permanent establishment issues from coronavirus (COVID-19) guidance note.

As part of the OECD’s base erosion and profit shifting (BEPS) project, changes were proposed under Action 7: 2015 Final

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