Corporate Residence

A Darker Shade Of Grey?

IT IS ACKNOWLEDGED that the determination of residence status for corporate bodies is often far from clear-cut and that considerable judgment is necessary in applying the rules explained below to practical situations. Corporate residence is a key tax risk management issue.

The incorporation rule

Companies incorporated in the UK are automatically treated as resident for tax purposes in the UK by virtue of FA 1988 s 66(1). The exception to the incorporation rule is where a UK-incorporated company is regarded for the purposes of any double taxation treaty as resident in a territory outside the UK and not resident in the UK (tie-breaker clause). A company satisfying this condition is treated for the purposes of the Taxes Acts as resident outside the UK (FA 1994 s 249(1)).

Many of the UK's tax treaties include a...