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UK Permanent Establishment

What International Companies Need To Know

If you are looking at employing someone in the UK for the first time then you need to understand the rules regarding Permanent Establishment in the UK as this could have an effect on your Company taxation.

  • If a company trades in the UK through a permanent establishment then this brings the profits generated from this permanent establishment into the charge to UK corporation tax.

    An overseas company will have a permanent establishment if:

    • There is a fixed place of business through which its business is carried on; or
    • An agent in the UK habitually exercises authority to do business on its behalf.

    A fixed place of business can include an office or workshop.

    If you are employing a salesperson who has authority to conclude contracts on the company’s behalf then the employee will constitute a permanent establishment. To avoid a permanent establishment, if a non-resident company has employees in the UK, they should not be given authority to negotiate or conclude contracts (this restriction can be written specifically into the employment contract and followed in practice).

    As a permanent establishment, the company will have an obligation to file their financial statements in the UK, and these will then be available to download from Companies House. Depending on the current requirements for filing accounts in your country you may not want to make your company’s financial statements available in the UK. If this is the case your Company will need to produce branch accounts in order to quantify the profits made from sales/permanent establishment in the UK and to calculate the corporation tax.

    The other alternative is to incorporate a UK subsidiary which will allow the company to only report the UK financial information.

Our parent company UHY Hacker Young (East) is part of the UHY Hacker Young International Accounting Group and can give you specific advice on whether or not your new UK business will constitute a Permanent Establishment. If you would like advice in this area then contact us at Payplus and we will make the appropriate introduction for you.