Residence and basis for taxation
United Kingdom
A company will be treated as a UK resident if it is incorporated in the UK or centrally managed and controlled (generally at the board level) in the UK.
Domestic
A UK resident company is subject to UK corporation tax on its worldwide income and gains (subject to relief for any tax paid on the same income or gains in other jurisdictions). The company may elect to leave out of account all trading profits and losses arising from branches outside the UK.
A UK resident company may be subject to the UK's diverted profits tax where it has entered into arrangements with a related person and that person or the transactions lack economic substance, and the arrangements result in a reduction in the UK resident company's taxable profits.
Foreign
A non-UK-resident company is not subject to UK tax except on:
- Income from a business carried on through a UK permanent establishment or from a trade of dealing in or developing UK land (irrespective of whether there is a UK permanent establishment)
- Income from intangible property that is referable to sales of goods, services or other property in the UK, where the income is receivable in a low or no tax jurisdiction (under the offshore receipts in respect of intangible property ("ORIP") rules)
- Other UK source income, but only to the extent of any withholding tax borne by that income, and
- Capital gains arising on disposals of interests in UK land and certain disposals of assets (wherever situated) that derive at least 75 percent of their value from UK land (see Capital gain)
A non-UK resident company may be subject to the UK's diverted profits tax where either:
- It has a UK permanent establishment that has entered into arrangements with a related person and that person or the transactions lack economic substance, and the arrangements result in a reduction in the taxable profits of the permanent establishment, or
- The company has entered into arrangements with a person who is carrying on activity in the UK and the arrangements are designed to ensure that the company does not have a permanent establishment in the UK
A digital services tax was introduced from April 1, 2020. It applies to businesses that provide social media services, internet search engines and online marketplaces, and any online advertising businesses that derive significant benefit from the foregoing businesses. Businesses are within the digital services tax when the group's worldwide revenues from in-scope digital activities are GBP500 million or more, and at least GBP25 million of these revenues are attributable to UK users.