INTM162032 - UK residents with foreign income or gains: double taxation relief - claims and procedures - certifying that a company is UK resident

If we are asked to certify that a company is UK resident, we will need to know the use to which such a certificate will be put before providing it.

For example, if a company requires a letter simply confirming that it is registered with HMRC in order to be allowed to do business in another State, a letter of confirmation can be issued, but the letter should make it clear that it is not a certificate of UK residence.

Where a company requests a certificate of UK residence in order to claim relief from foreign tax check the Double Taxation Relief Manual at DT2140+ to see if the other State has provided a form for claiming relief from its tax on the income in question. If such a form exists, the company must make its claim using it and ask HMRC to certify its residence status on the form. The other State will have designed the form with the intention that it should be used in relation to the types of income in question, and we will not undermine its administrative procedures by providing a letter certifying UK residence instead.

Whether a form is provided or not, HMRC will not support a claim for treaty benefits that cannot not be justified. A company requesting a letter certifying UK residence should provide details of the nature of the proposed transaction and the income concerned.. We will check the relevant DTC to make sure that there is no obvious reason why the company could not claim the treaty benefits. Acertificate of UK residence will not be issued if its provision could mislead the other State into an erroneous belief that treaty benefits are due.

It should usually, for example in the case of established companies whose tax affairs are well known to us, be possible to certify that a UK-incorporated company that is clearly the beneficial owner of the overseas income is a resident of the UK for the purpose of claiming relief of the foreign tax in respect of that income and/or depending on the terms of the DTC, is subject to tax in the UK in respect of the income. However, see INTM162032A where the income includes foreign dividends.

Dual Residence

However, a UK-incorporated company could also be resident in another State under that State's domestic law. Such a company would then be dually resident. The relevant DTC may have a method for determining where a company is resident for the purposes of that treaty. Where this is the place of effective management, this will be a question of fact, and should be determined on the evidence.

If the company's place of effective management is in the other State, it would not then be regarded as a resident of the UK for treaty purposes. Additionally (except for the purposes of the controlled foreign company rules in certain situations) under CTA09/S18 the company would not be regarded as resident in the UK under domestic law either. Consequently it would not be a resident of the UK for the purposes of any other DTC that the UK has entered into.

The lack, or limited extent, of presence or activities in the UK might be an indication that the company is effectively managed outside the UK, and that it is therefore a dual resident company, with the consequences described above. If a UK-incorporated company does not seem to have much or any presence or activities in the UK, we will not certify that the company is a resident of the UK for treaty purposes if we

• have reasonable grounds for believing that the company may be effectively managed in, and hence resident in, a State other than the UK with which the UK has a DTC with a tie-breaker test for dual resident companies; or
• have insufficient information to make a decision one way or the other.

When considering the extent of a company’s presence or activities in the UK it may be necessary to seek information regarding the residence status of the company's directors (including shadow directors) and the ultimate beneficial shareholders.

A company seeking a certificate of UK residence should, however, be able to provide sufficient information to show where it is effectively managed if requested. Any points of difficulty should be referred to CTIAA, Business International, Outward Investment Team for further advice. (This text has been withheld because of exemptions in the Freedom of Information Act 2000)

Wording for a Certificate of Residence (where no form provided by the other state)

To whom it may concern

I certify that to the best of HM Revenue & Customs’ knowledge [Name and RO of company] as at [date] is a resident of the UK in accordance with Article 4 and fulfils the criteria of Article [relevant to type of income]of the Convention in force between the UK and [other State]

Date

Office Stamp, Name and signature of Officer