Non-UK Company Trading in the UK? When You Need to Pay Corporation Tax

If you run a company incorporated outside the UK but do business here, you may have UK corporation tax obligations. The rules depend on whether your company has a permanent establishment in the UK and the nature of your UK activities.

When Does a Non-UK Company Pay UK Corporation Tax?

A non-UK resident company pays UK corporation tax if it:

Trades in the UK through a permanent establishment — taxed on profits attributable to that establishment
Has UK property income — rental profits from UK property are taxable
Has UK capital gains on property — gains from disposing of UK property or land (from April 2019)

What is NOT taxed

A non-UK company is generally not subject to UK corporation tax on:

Trading profits earned entirely outside the UK
Interest received from UK sources (subject to withholding tax instead)
Dividends received from UK companies

What Is a Permanent Establishment?

A permanent establishment (PE) is a fixed place of business through which the company carries on its trade. HMRC follows the OECD model definition:

Fixed places that create a PE

An office or place of management in the UK
A branch or factory
A workshop or warehouse (if used for trading)
A place of extraction of natural resources
A building site or construction project lasting more than 12 months

Activities that create a PE (even without a fixed place)

An agent in the UK who habitually exercises authority to conclude contracts on the company's behalf
A dependent agent who acts exclusively or almost exclusively for the company

Activities that do NOT create a PE

Using UK facilities solely for storage or display of goods
Maintaining a stock of goods solely for processing by another company
A fixed place used solely for purchasing goods or gathering information
Activities of a preparatory or auxiliary character
An independent agent acting in the ordinary course of their business

The UK-Incorporated vs UK-Resident Distinction

UK-incorporated

If a company is incorporated at Companies House, it is automatically UK resident for tax purposes (regardless of where it's managed) — with very limited exceptions for companies resident in treaty countries.

Non-UK incorporated

A company incorporated abroad is UK resident if its central management and control is exercised in the UK. This typically means the board of directors meets and makes strategic decisions in the UK.

How to Register for UK Corporation Tax

If your non-UK company has a UK permanent establishment, you must:

Step 1: Register with HMRC

Notify HMRC within 3 months of starting to trade through a UK PE. Use form CT41G or register online.

Step 2: Register at Companies House

If your overseas company has a UK establishment, you must also register at Companies House under the Overseas Companies Regulations 2009.

Step 3: Get a Unique Taxpayer Reference (UTR)

HMRC will issue a UTR for your UK corporation tax obligations.

Filing a CT600 as a Non-UK Company

Non-UK companies with UK PEs file a CT600 just like UK companies, with some differences:

What to include

UK PE profits only — not worldwide profits
Expenses attributable to the UK PE
Transfer pricing adjustments if transactions with the overseas head office aren't at arm's length
Branch profits allocated using OECD principles

Double taxation relief

If the same profits are taxed in both the UK and your home country, you can usually claim relief under a double taxation treaty (if one exists between the UK and your country) or unilateral relief.

The CT600 boxes

Box 1: Report UK PE trading profits
Box 100: Claim double taxation relief
Standard boxes for expenses, capital allowances, etc.

UK Property Income for Non-UK Companies

Since April 2020, non-UK companies with UK property income are within the corporation tax regime (previously they paid income tax). This means:

What you must do

Register for UK corporation tax
File a CT600 annually
Report rental income and allowable expenses
Pay corporation tax at the standard rates (19%/25%)

Allowable deductions

Mortgage interest (at the corporate rate, not restricted like for individuals)
Repairs and maintenance
Management fees
Insurance, rates, and other property costs

Capital gains on UK property

Gains on disposing of UK property are also within corporation tax for non-UK companies (since April 2019).

Transfer Pricing

If your non-UK company has transactions between the UK PE and the overseas head office (or other group companies), transfer pricing rules apply.

What this means

Transactions must be at arm's length (market value)
If the UK PE pays above-market-rate management fees to the head office, HMRC can adjust the profits upward
Documentation requirements: maintain transfer pricing documentation if turnover exceeds €50 million (EU threshold) or if HMRC requests it

Common adjustments

Management charges from head office to UK PE
Royalty payments for use of IP
Interest on inter-company loans
Goods or services provided between entities

Diverted Profits Tax

If a non-UK company artificially avoids having a UK PE, or arranges its affairs to divert profits from the UK, Diverted Profits Tax (DPT) may apply at 25%. This targets:

Companies that structure their UK activities to stay just below the PE threshold
Arrangements designed to exploit tax mismatches between countries

DPT is aimed at large multinationals, not small overseas businesses with genuine UK operations.

Withholding Tax Obligations

Even without a UK PE, a non-UK company may face UK withholding tax on:

Interest paid from UK sources (20% default, reduced by treaty)
Royalties paid from UK sources (20% default, reduced by treaty)
UK property income (20% under NRLS, but this shifts to corporation tax once registered)

Practical Steps for Overseas Companies

Already trading in the UK?

Determine if you have a PE (check the list above)
If yes, register with HMRC within 3 months
Register at Companies House as an overseas company
File CT600 returns annually
Consider double taxation relief

Planning to start UK operations?

Get advice on whether your proposed activities create a PE
Consider whether incorporating a UK subsidiary might be simpler
Check the relevant double taxation treaty
Budget for UK corporation tax compliance costs

UK subsidiary vs UK branch

Factor	UK Subsidiary	UK Branch (PE)
Legal entity	Separate UK company	Extension of overseas company
Filing	CT600 on worldwide profits	CT600 on UK PE profits only
Liability	Limited to subsidiary's assets	Parent potentially liable
Compliance	Companies House + HMRC	Companies House + HMRC
Profit extraction	Dividends to parent	Direct remittance
Simplicity	Generally simpler	Transfer pricing complexity

Many overseas companies choose to set up a UK subsidiary rather than operate through a branch, as it creates cleaner separation and simpler compliance.

Frequently Asked Questions

My company has no UK office but sells to UK customers online. Do I need to pay UK corporation tax?

Generally no, unless you have staff, an agent, or a fixed place of business in the UK. Simply selling remotely to UK customers doesn't create a PE. However, you may have VAT obligations.

I'm a UK resident director of a foreign company. Does that create a PE?

Potentially yes. If you're making management decisions for the company from the UK, this could create central management and control in the UK, making the company UK resident. Get specialist advice.

How do I calculate UK PE profits?

Use the functionally separate entity approach — treat the UK PE as if it were a standalone entity dealing at arm's length with the overseas company. Attribute profits based on functions, assets, and risks in the UK.

Can I claim UK capital allowances?

Yes. If assets are used by the UK PE, capital allowances are available in the normal way.

What tax rate applies to non-UK companies?

The standard UK corporation tax rates apply:

19% on profits up to £50,000
25% on profits over £250,000
Marginal relief between £50,000 and £250,000

Need to file a CT600 for your UK permanent establishment or property income? Try Taxpipe — £59 per filing, handles all the standard CT600 requirements.

See also: If you're a UK company earning income overseas (rather than an overseas company trading in the UK), read our corporation tax on overseas income guide.