Answer ... Profits attributable to a non-resident corporate’s UK permanent establishment are chargeable to UK corporation tax, wherever they arise.
Certain classes of income payable to non-UK companies may be subject to UK withholding tax at a rate of 20%, subject to a wide range of exemptions and relief across the United Kingdom’s broad tax treaty network.
Currently, non-UK resident companies are subject to corporation tax on profits arising from property trading and development in the United Kingdom and on gains arising from the disposal of interests in all UK real estate, whether those interests are held directly or indirectly through a property-rich entity (one that derives 75% or more of its gross asset value from UK real estate), if certain ownership tests are met. They are currently subject to income tax on investment (eg, rental) income from UK real estate, but that will change to corporation tax liability in 2020.
The UK diverted profits tax (see question 5.3) applies a 25% rate of tax on profits deemed to be attributable to a non-resident’s ‘avoided UK permanent establishment’ under the particular regime.
See question 2.5 for further discussion of the United Kingdom’s new offshore intangible charge.
Answer ... Subject to the application of double tax treaties or other exemptions, the United Kingdom levies withholding tax on payments of royalty or interest income to non-residents. There is no UK withholding whatsoever on dividend payments to non-residents.
Double taxation treaties may provide for a lower applicable rate of withholding, and useful exceptions to the withholding obligation include an exception for interest paid in respect of interest-bearing securities admitted to trading on a multilateral trading facility within the European Economic Area (the Eurobond exception).
Answer ... Yes. Such treaties are generally incorporated into domestic law and supersede the underlying domestic rules. However, a claim is often required in order for relief to be effective.
The United Kingdom’s approach is considered to be in line with Organisation for Economic Co-operation and Development guidance on double tax treaty practice, as the United Kingdom generally denies treaty benefits only where the UK tax authority considers that a tax avoidance motive is present.
The United Kingdom has signed and ratified the Multilateral Instrument (MLI), which amends its existing taxation treaties in line with Base Erosion and Profit Shifting Action 15 to the extent that the other contracting nation has also ratified the MLI.
Answer ... Unilateral relief (in forms including deductions and credits) will usually be available for foreign taxes corresponding to UK taxes on both income and chargeable gains. Broadly, the relief system operates to reduce UK corporation tax due on a source of income by the lower of the UK corporation tax due on that sum and the foreign tax incurred on it.
Answer ... This will depend on the structuring of the in-bound migration, but a number of reorganisation structures could produce this effect.
Answer ... Yes. An exit tax may arise on the transfer of tax residence of a corporate entity, the transfer of assets out of the jurisdiction and the cessation of a trade carried out in the United Kingdom through a permanent establishment.
Generally, the effect of the UK regime is that a deemed disposal and reacquisition of the assets occurs at market value, giving rise to corporation tax on any latent gains in the assets. The effects of the deemed exit charge can be mitigated if the migration is to another EEA state, as the tax due may be paid in instalments.
The United Kingdom’s participation regime (see question 2.2) provides a principal means of mitigating this charge for holding companies.