Indice
- I. I. General principles on taxation of non-residents
- II. II. Trading in the UK
- A. Branch, agency and permanent establishment
- B. Partnerships and non-resident partners
- C. Compliance requirements
- D. Investment manager exemption
- III. IlI. Employment income and artists/sportsmen remunerations
- IV. IV. Investment income and outbound payments
- A. Dividends
- B. Interests
- C. Royalties
- V. V. Rental income
- VI. VI. Capital gain taxation
- A. Disposal of UK land and properties
- B. Non-resident capital gain tax and compliance aspects
I. I. General principles on taxation of non-residents
Non-residents taxation is based on domestic rules and on international provisions contained in double tax treaties. The focus of this article would be on domestic laws and practices. There are four main categories of income[1] that non-residents may be taxed on:
- Profits of a trade or profession which is not carried out wholly outside the UK;
- Earned income on UK pensions and employments where duties are carried out in the UK (Income Tax Earnings and Pensions Act [ITEPA] 2003, s. 27);
- Investment income (Income Tax Act [ITA] 2007, s. 811);
- Income deriving from real estate activities and assets (rents and capital gains).
While categories sub b), c) and d) are subject to a set of statutory rules quite well-defined, it is complex to determine whether a trade or profession – concepts barely defined in the legislation – is carried out in the UK, being the area rich in law cases and different nuances and perspectives.
It is of paramount importance to understand, for those not accustomed to deal with UK tax laws, two basic principles: firstly, that there is no charge to UK tax if there is no trade therein (ITTOIA05/S6(2) and secondly that the concept of trade may be not necessarily linked to the existence of a permanent establishment[2].
For procedural and compliance purposes, it is worth summarizing the decisional process in a four basic questions steps as follows: (i) there is a charge under domestic legislation on the activities?; (ii) if yes, if the non-resident is a resident of a state with which the UK has a double taxation agreement, such a treaty restricts the domestic charge?; (iii) how much are the chargeable profits that can be taxed in the UK?; (iv) having established that there is a domestic charge and having taken account of the effects of the relevant treaty, how do we assess and collect any tax that is due?