There is a temporary exemption from UK Corporation Tax and UK Income Tax for certain non-resident Rights Holding Broadcasters, the Olympic Broadcasting Service and their direct contractors.
This exemption covers income earned from broadcasting the London 2012 Olympic and Paralympic Games (the Games) and only applies for the purposes of UK tax. A business may still have to pay tax in its home country.
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The exemption is for businesses that are non-resident in the UK but are in the UK temporarily to carry out Games-related activities. The business must be one of the following:
A Rights Holding Broadcaster (RHB) is an organisation to whom the International Olympic Committee (IOC) or London Organising Committee of the Olympic Games (LOCOG) has granted exclusive television, internet or radio rights to broadcast the Games in a particular territory.
The Olympic Broadcasting Service (OBS) is the organisation responsible for producing international television and radio signals and providing broadcasters with the facilities and services necessary for broadcasting the Games.
The exemption means that any activities that are necessary for the broadcast of the Games and are undertaken by employees of any RHB, the OBS, or any of their direct contractors will not create a permanent establishment for the RHBs, the OBS, or their direct contractors. It doesn’t matter if the employees of those businesses are themselves resident or non-resident in the UK.
To qualify for the exemption, the activities must be carried on in the period 30 March 2012 to 8 November 2012.
Income received by a company (i.e. a broadcaster or its direct contractor) for carrying out the activities that are disregarded for permanent establishment purposes in the period 30 March to 8 November 2012, is also exempt from Income Tax when there is no double taxation agreement in place between the territory in which it is resident and the UK.
A company resident in a state with which the UK does not have a double taxation agreement can still be liable to Income Tax on its UK trading activities, even if it does not have a permanent establishment in the UK.
There is separate guidance on the Income Tax exemption for non-resident individuals which applies to employees of a Rights Holding Broadcaster or the Olympic Broadcasting Service, self-employed direct contractors working for those broadcasters, and employees of those contractors.
When considering if a non-resident company is chargeable to UK corporation tax HMRC consider whether it is trading in the UK through a ‘permanent establishment’.
A permanent establishment in the UK exists when business is carried
on from a distinct fixed place (for example an office, or a studio)
for a minimum of 6 months.
If your business is non–resident in the UK and you are in the UK temporarily for a period of less than six months, you will not have a permanent establishment here and do not have to pay UK Corporation Tax.
The exemption from having a permanent establishment means the non-resident broadcasters and their direct contractors are exempt from Corporation Tax on the income they earn from activities that are necessary for broadcasting the Games.
HMRC will ignore the presence of employees of non-resident broadcasters - or their non-resident direct contractors - at a particular place in the period 30 March 2012 to 8 November 2012, when determining whether those non-resident enterprises are trading through a permanent establishment in the UK.
This exemption means that a non-resident broadcaster or its direct contractor could be at the same location in the UK for more than six months and not create a permanent establishment as the exempt period (30 March 2012 to 8 November 2012) is disregarded. Therefore, it would be possible for a RHB, the OBS, or their direct contractor to carry on their business at a location from September 2011 until the end of the exemption period on 8 November 2012 (six months plus the exemption period 30 March to 8 November 2012) without creating a permanent establishment.
The time during which the place of business is being set up is not counted in determining whether there is a permanent establishment.
The permanent establishment rules apply to each separate location at which a non-resident carries on its business.
Income received by a broadcaster that is not a Rights Holding Broadcaster or the Olympic Broadcasting Service, or by a company that is not a direct contractor for them, is not exempt even if it comes from a broadcasting activity connected with the Games. The normal permanent establishment rules will apply to determine whether the company is liable to corporation tax in the UK.
If a non–resident business carries on both Games-related and non-Games related work at the same location only the Games related work is ignored for the purpose of determining whether there is a permanent establishment. Therefore the exemption from permanent establishment may not apply if the non-resident broadcaster or its direct contractor would otherwise have a permanent establishment at that location, for example, because its employees are present there and carrying on non-Games-related work for more than six months; in that case all of the income earned by that permanent establishment will be within the charge to Corporation Tax.
If you’ve checked the HMRC website, asked your tax advisor (if appropriate) but you still can’t find an answer to your query you can contact HMRC on Tel: 020 7147 2655
If you’re calling from abroad, please telephone Tel: +44 20 7147 2655.