UK taxation of profits of overseas companies

By Tolley

The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • UK taxation of profits of overseas companies
  • Branch (permanent establishment)
  • Is there a trade?
  • Trading ‘with’ or ‘in’ the UK?
  • Taxable profits
  • Withholding tax

This guidance note explains how UK profits of overseas companies are subject to UK tax. For an overview of how overseas companies can be subject to UK tax, and how tax is collected, see the Non-UK companies subject to UK tax guidance note.

Where the overseas company chooses to do business in the UK via a subsidiary, that UK subsidiary will be subject to UK corporation tax in the usual way. Transfer pricing will need to be taken into account when considering the price at which any intra-group transactions between the UK subsidiary and the overseas parent tax place. See the Overview of transfer pricing principles guidance note.

Branch (permanent establishment)

An overseas business that carries on its business directly in the UK, rather than through a subsidiary, will only be subject to corporation tax in the UK if it carries on a trade through a permanent establishment here, either in accordance with the relevant tax treaty or, where there is no tax treaty, in accordance with UK domestic law. The UK definition of 'permanent establishment' for domestic law purposes can be slightly different to the definitions which are used in UK tax treaties, and so the position should be checked in respect of the relevant treaty in each case.

CTA 2009, s 5

A non-UK business may

More on UK tax for non-UK companies: