GIM10110 - Non-resident insurers: the scope of UK taxing rights: the corporation tax charge

Accounting periods beginning before 1 January 2003

The charge to corporation tax on non-resident general insurers (like that on all other non- resident companies), for accounting periods ending before 1 January 2003 is on

• trading income arising directly or indirectly through or from the branch or agency, and
• any other income from property or rights used by, or held by or for, the branch or agency (including income falling within Case V),
• but not distributions received from companies resident in the United Kingdom

(ICTA88/S11 (2)(a))

• chargeable gains falling within TCGA1992/S10 (3)
• on assets situated in the UK and used in or for the purposes of the trade at or before the time the gain accrued
• on assets situated in the UK and used or held for the purposes of the branch or agency before that time
• on assets acquired for use by or for the purposes of the branch

(ICTA88/S11 (2)(b)).

The branch or agent is treated as the tax representative of the company and is liable for the tax and to perform all necessary administrative functions such as making returns (FA95/S126 and FA95/SCH23).

Double taxation agreements

For accounting periods beginning before 1 January 2003, if the non-resident general insurer is a resident of a country with which the UK has a comprehensive Double Taxation Agreement (DTA), the charge to corporation tax on business profits may be affected by the business profits and other articles of the DTA (ICTA88/S788 (3)(c)(i)). The charge is limited to profits effectively connected with a permanent establishment of the company in the UK. Specific treaties may give particular and different treatment to insurance business, e.g. those with Australia, Barbados, Belgium, France, Republic of Ireland (life only), Jamaica, Kenya, New Zealand and South Africa (life only). See the International Manual (INTM151000 and INTM161000 onwards) for general guidance on double taxation treaties.

Accounting periods beginning on or after 1 January 2003

The charge to corporation tax was amended by section 149 Finance Act 2003. This substituted sections 11(1) to (2A), and inserted a new section 11AA and a new Schedule A1 into ICTA 1988. These changes have effect for periods beginning on or after 1 January 2003. The effect is that the charge arises where the non-resident carries on a trade in the UK through a permanent establishment (PE). This term is defined in FA03/S148 and follows in large part the meaning of PE in the OECD Model Tax Convention on Income and on Capital (OECD Model). The exclusion for distributions is no longer reflected in section 11, as ICTA88/S208 applies to non-residents as it applies to residents.

The PE of a general insurance company remains the tax representative (FA2003/S150).

TCGA92/S10 (3) which imposes tax on chargeable gains of non-resident companies is replaced by a new TCGA92/S10B, but the effect and scope are the same.