By virtue of ICTA88/S8 a company is charged to corporation tax on all its profits, wherever arising “subject to any exceptions provided by the Corporation Tax Acts”. ICTA88/S6 provides that corporation tax is charged on the profits of companies and excludes a double charge to income tax and corporation tax. The otherwise wide scope of corporation tax is cut back for non-UK resident companies by ICTA88/S11. Before the changes made by FA03/S148 to ICTA88/S150 the charge to corporation tax on non-resident general insurers (as for other non- resident companies) for accounting periods ending before 1 January 2003 was expressed in the following terms – ICTA88/S11 (2)(a):
and for gains ICTA88/S11 (2)(b):
The branch or agent was treated as the tax representative of the
company and liable for the tax and to perform all necessary
administrative functions such as making returns - FA95/S126 and
FA03 made the following changes, for accounting periods beginning on or after 1 January 2003
These changes had the effect of bringing UK law closer in
wording to international law, using the broader ‘permanent
establishment’ term and aligning more closely with the
concepts of the OECD Model Tax Convention. The explicit exclusion
of distributions disappeared as covered by ICTA88/S208.
An overseas insurer (not trading through a UK resident subsidiary) will normally carry on UK insurance activities through what amounts to a permanent establishment. Business carried on in the UK refers to where the activity takes place, and not necessarily the location of the risks. See also GIM10060 dealing with the regulatory position.