GIM10210 - Non-resident insurers: the scope of UK taxing rights: accounting periods beginning on or after 1 January 2003: section 11 ICTA & Article 7 OECD Model: changes in FA 2003

ICTA88/S11 (1) to ICTA88/S11 (as substituted by FA03/S149) provides that corporation tax is chargeable on the profits of a non-resident attributable to its permanent establishment (PE) in the UK (“chargeable profits”). Chargeable profits means

  • trading income arising directly or indirectly through or from the PE (ICTA88/S11 (2A)(a))
  • any other income from property or rights used by, or held by or for, the PE (including income falling within Case V) (ICTA88/S11 (2A)(b))
  • chargeable gains falling within TCGA92/S10B (ICTA88/S11 (2A)(c))
  • 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 PE before that time, or on assets acquired for use by or for the purposes of the PE.

The express exclusion for distributions that was in the old section 11(2) (see GIM10110) is not reproduced, as ICTA88/S208 applies to non-resident companies as it applies to resident companies.

The PE 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 (FA03/S150 and ICTA88/SCHA1).

The FA 2003 legislation enacts into UK law the effect of Article 7 of the OECD Model. Thus any argument about the extent to which if at all the scope of Article 7 and that of section 11 are different is laid to rest. The discussion in GIM10120 onwards on the effect of Article 7 is and remains applicable to any non-resident general insurer whose head office is not in a treaty country.

For periods beginning on or after 1 January 2003, the balance of premiums, claims, expenses and provisions (the underwriting result) disclosed on the FSA return clearly falls within both section 11 and Article 7. So the presumption should be made that business disclosed in that return is business falling within section 11. In the case of an EEA insurer these figures will have to be taken from whatever accounts and information are prepared by the company and submitted with its return. If nothing else is available, the details given by the company to its home state regulator as UK branch business in its Article 44.2 Third Directive return is a starting point.