UK tax pitfalls of the foreign company

1 min read

There are several bear-traps for a foreign company proposing to do business in the UK other than through a UK establishment, including three tax regimes introduced during the last five years. Does the foreign company have a UK permanent establishment and, if not, could it be caught by the diverted profits tax's 'avoided PE' rule? Does it receive income from intangibles that may be subject to the new regime taxing offshore receipts? Separately, if it provides digital services to UK users or supplies goods in the UK, it may find itself in scope of the new digital services tax or liable to UK VAT registration.

It's easy to dismiss the UK taxation of foreign corporates as arising only if a company has any real presence in the UK, be it through tax residence or other establishment. In this article, we touch on UK permanent and fixed establishments of companies established outside the UK and highlight some of the key UK tax bear-traps for companies with no such presence (but which nevertheless do business in the UK), including three regimes which have sprung up only in the last five years or so. Laura Hoyland and Elizabeth Emerson explain the various bear-traps for a foreign company proposing to do business in the UK.


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Reproduced with permission from Tax Journal, 29th May 2020 issue. For more information, please visit Tax Journal.

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