CTM34230 - Residence: non-resident companies:
differences in treatment compared to resident companies
The other main areas in which the taxation of non-resident
companies differs from that of resident companies are listed below.
A non-resident company cannot:
- Join in an election under ICTA88/S247 (1)
for distributions made prior to 6 April 1999,
CTM80085.
- Join in an election under ICTA88/S247 (4)
for payments made before 11 May 2001, CTM80085.
- Claim a deduction for management expenses,
CTM08000 onwards.
- Make a payment that ranks as a charge
unless it is made under a liability incurred wholly and exclusively
for the purposes of a trade carried on in the UK through a branch
or agency. Payments made before 1 April 2000 which are 'covenanted
donations to charity' and payments made on or after 1 April 2000
which are 'qualifying donations' do rank as charges,
CTM09020.
- Make a payment to a non-resident person
which ranks as a charge on income unless DT1951 applies.
- Receive a surrender of ACT,
CTM81200 onwards.
- Be a close company (but may be treated as
close for the purpose of establishing the close company status of a
resident company).
- Claim small companies relief under
ICTA88/S13 (
CTM03500 onwards) for any accounting
period in which it is non-resident (see DT1954 for foreign
companies with a permanent establishment in the UK).
- Make or receive dividends and other
distributions, which are within the scheme of ICTA88/S7 and
ICTA88/S20.
This means a non-resident company:
- is not liable to account for ACT on
distributions made prior to 6 April 1999,
- cannot have 'franked investment
income',
- cannot have surplus franked investment
income for the purposes of ICTA88/S242,
- cannot set trading losses against dividend
income to augment its trading income for the purposes of absorbing
losses brought forward.
Distributions received by a non-resident company from UK
companies remain outside the charge to CT.
Distributions made by a non-resident company do not carry tax
credit and are not franked investment income when received by a
resident company. This applies even if the non- resident company
trades in the UK.
