United Kingdom

UK incorporated companies are generally treated as UK tax resident. The exception to that general rule is that companies resident in the United Kingdom under domestic law but treated as solely resident in a different country under that country's DTT with the United Kingdom are not treated as UK tax resident for the purposes of UK domestic tax law.

Additionally, subject to the above exception, companies incorporated overseas are also treated as UK tax resident if their central management and control is situated in the United Kingdom. This means if the place of the highest form of control and direction over a company's affairs, as opposed to decisions on the day-to-day running of the business, is in the United Kingdom.

As noted under 'Consultations and proposals - ongoing' in the Significant developments section, following a consultation, the UK government announced in April 2022 that it intends to introduce a re-domiciliation regime, which will make it possible for companies incorporated outside the United Kingdom to move their domicile to and relocate to the United Kingdom whilst retaining their legal personality. The expert panel that was subsequently convened to explore the options and advise the government on how best to establish a UK corporate re-domiciliation framework published its report on 14 October 2024. The report suggests how various components of the regime could work and, most notably, strongly supports the introduction of a two-way re-domiciliation regime to allow UK companies to re-domicile outside the United Kingdom as well as those registered outside the United Kingdom to become a UK company. Whilst the panel has made quite detailed proposals, it recommended that there should be further consultation once the government has decided on more detailed proposals. The government intends to consult in due course on a proposed regime design.

Permanent establishment (PE)

For non-resident companies, the liability to corporation tax generally depends on the existence of any kind of PE through which a trade is carried on. However, there are a number of exceptions to this general rule that apply to income and gains arising on UK property. A non-UK resident company will be subject to UK tax on the following types of profit even if there is no UK trading PE:

• Trading profits attributable to a trade of dealing in or developing UK land.
• Gains that arise on the direct, and certain indirect, disposals of UK immovable property.
• Profits of a UK property rental business.

The meaning of PE for UK tax purposes is set out in statute. Historically the UK’s definition, though largely based on the OECD Model Tax Convention definition, was not identical in all respects.  Legislation has been included in Finance Bill (No2) 2025 which will align the definitions and attribution rules.  When enacted, these changes will take effect from 1 January 2026.  (See more in the Significant Developments section above). Subject to the terms of the relevant DTT, a non-resident company will have a PE in the United Kingdom if:

• it has a fixed place of business in the United Kingdom through which the business of the company is wholly or partly carried on, or
• an agent acting on behalf of the company has and habitually exercises authority to do business on behalf of the company in the United Kingdom.

A fixed place of business includes (but is not limited to) a place of management; a branch; an office; a factory; a workshop; an installation or structure for the exploration of natural resources; a mine, oil or gas well, quarry, or other place of extraction of natural resources; or a building, construction, or installation project. However, a company is not regarded as having a UK PE if the activities for which the fixed place of business is maintained or which the agent carries on are only of a preparatory or auxiliary nature (also defined in the statute) except where the non-resident has artificially fragmented their business operations to avoid coming within the charge to corporation tax.

Special rules exist to explain how the PE's profits should be evaluated for UK tax purposes (see the Branch income section for more information).