Residence of companies

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:

  • Residence of companies
  • Statutory residence test
  • ‘Case law’ test
  • The impact of coronavirus (COVID-19) on corporate residence
  • Tie-breaker provisions
  • Dual residence
  • Double tax treaties

Residence of companies

The concept of residence is important because corporation tax is chargeable on the worldwide profits of any company that is resident in the UK. The liability may be reduced by exemption or relief under a double taxation agreement or by unilateral relief. Non-UK resident companies are only liable to UK corporation tax on certain sources of income, such as profits attributable to a trade of dealing in or developing UK land, for example.

This guidance note outlines when a company will be treated as resident in the UK. There may also be tax consequences when the residence of a company changes.

See the Inbound migration and Outbound migration guidance notes.

A company will be treated as resident in the UK if it is incorporated in the UK (the ‘statutory test’ ― CTA 2009, s 14) or centrally managed and controlled in the UK (the ‘case law test’). See also the Non-UK companies subject to UK tax guidance note for further commentary on how a non-UK company may be subject to UK tax and the relevant UK filing requirements.

More detailed commentary on company residence can be found in Simon’s Taxes D4.103. HMRC guidance on company residence can be found in the International Manual.

Statutory residence test

If a company is incorporated in the UK, then it is resident in the UK and it is not necessary to consider where it is centrally managed and controlled. The definition of the ‘United Kingdom’ means Great Britain (England, Wales and Scotland) and Northern Ireland. It does not include the Isle of Man or the Channel Islands.

‘Case law’ test

Companies which are not incorporated in the UK are nonetheless UK resident if their place of central management and control is in the UK.

The phrase ‘central management and control’ came from De Beers Consolidated Mines. Lord Loreburn said “the business is carried on where the central management and control actually abides”. Over the years, many more cases, including those referenced below,

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