A company incorporated in the UK is UK resident for corporation tax under section 14 of the Corporation Tax Act 2009, wherever it is run. A company incorporated abroad is UK resident if its central management and control is exercised in the UK, which is a question of fact about where the highest level of decisions is really taken. If a treaty tie breaker awards residence to another country, section 18 treats the company as non UK resident.

Why does company residence decide the tax bill?

Section 5 CTA 2009 sets the territorial scope of corporation tax. A UK resident company is chargeable on all its profits wherever arising, subject to double taxation relief and an optional exemption for the profits of foreign permanent establishments. A non UK resident company is within the charge only if it carries on a property dealing or development trade in the UK, trades in the UK through a permanent establishment, carries on a UK property business, or has other UK property income. INTM120010 adds that a non resident company may also be liable to UK income tax on some non trading income.

The difference is large. A UK resident company reports its worldwide profits on its corporation tax return, while a non resident company is taxed only on the UK connected profits described in our guide to a permanent establishment for overseas companies.

How does the incorporation rule work?

Section 14(1) CTA 2009 says a company incorporated in the UK is UK resident for the purposes of the Corporation Tax Acts. Section 14(2) adds that even if a rule of law would give it a different place of residence, it is not resident there for those purposes. The rule began as section 66 of the Finance Act 1988 with effect from 15 March 1988, and HMRC’s Statement of Practice SP1/90 explains the transitional exceptions for some companies that carried on business before that date and migrated with Treasury consent.

The practical effect is that moving the directors, the board meetings or the whole business abroad does not on its own take a UK incorporated company out of UK residence. HMRC’s guidance at INTM120040 says any case where a UK incorporated company claims non residence other than through a treaty is referred to a specialist team.

What is central management and control?

For a company incorporated abroad, residence depends on case law. The classic statement is Lord Loreburn’s in De Beers Consolidated Mines Ltd v Howe: a company resides where its real business is carried on, and the real business is carried on where the central management and control actually abides. De Beers was a South African company with its mines in South Africa, but its controlling board exercised its powers in the UK, so it was UK resident.

In Bullock v Unit Construction Co Ltd the African subsidiaries’ constitutions required board meetings outside the UK, but the parent’s board in the UK was in fact making the real decisions, and the subsidiaries were held UK resident. INTM120060 draws two lessons: the place of central management and control is a question of fact, and it is the highest level of control that counts, whether exercised by the board or by someone who has taken over that role.

SP1/90 paragraph 11 describes it as the highest level of control of the business, to be distinguished from where the main operations are, and notes that control can be exercised tacitly through passive oversight. The courts have also accepted that, exceptionally, control may be divided so that a company is resident in more than one country.

Do board meetings decide where control lies?

Board meetings are important but not conclusive. SP1/90 says the decided cases attach importance to where the board meets, but the place of meetings counts only so far as the meetings are the medium through which central management and control is exercised. If the directors actively run a wholly UK business together in the UK, holding formal meetings abroad does not make the company non resident. Where a chairman, managing director or dominant shareholder in practice makes the decisions and the rest of the board are, in SP1/90’s words, little more than ciphers, the company is resident where that person exercises control.

Where residence is in doubt, HMRC first asks whether the directors in fact exercise central management and control, then where they exercise it (which is not necessarily where they meet), and, if the directors do not exercise it, where and by whom it is exercised. Where factors seem to exist mainly to obtain a tax benefit, HMRC examines the facts particularly closely to see whether the appearance of control has been created without the reality.

How are subsidiaries of overseas groups treated?

A parent will always influence its subsidiary. SP1/90 paragraph 16 says HMRC will not argue that a subsidiary is resident where its parent is merely because the parent uses ordinary shareholder powers, such as appointing directors or approving changes to the financial structure. It will draw that conclusion where the parent usurps the subsidiary board’s functions or the board rubber stamps the parent’s decisions without independent consideration. Relevant evidence includes how far the subsidiary’s directors decide investment, production, marketing and procurement on their own authority.

What happens if a company is resident in two countries?

A company can be UK resident under UK rules and resident elsewhere under that country’s rules. Section 18 CTA 2009 provides that if the company is treated as resident in the other territory, and not in the UK, for the purposes of double taxation arrangements, it is non UK resident for all corporation tax purposes, even if it would otherwise be UK resident under section 14. The test assumes a claim has been made, so the company cannot choose whether to invoke the treaty.

INTM120070 explains that HMRC now considers all UK treaties to contain a company tie breaker, but they work in two ways. Following the BEPS project, many treaties use a tie breaker under which the competent authorities of the two countries agree residence, so section 18 applies only once they have made a determination. Others still use an objective place of effective management test, which HMRC can apply on its own. The OECD Commentary describes the place of effective management as where key management and commercial decisions necessary for the business as a whole are in substance made. SP1/90 paragraph 22 notes that it can differ from central management and control, for example where executives run the company abroad but final power rests with non executive directors meeting in the UK.

A dual resident company must self assess its position and should not delay filing returns while a determination is pending (INTM120080).

Worked example

Illustration only. A trading company is incorporated in an offshore jurisdiction. Its two directors and shareholders live in England, agree the strategy, pricing and major contracts over the phone and in their English office, and fly out four times a year to sign minutes approving what has already been decided. On SP1/90’s approach the formal meetings are not the medium of control, so central management and control is in the UK and the company is UK resident, taxable on its worldwide profits.

If instead the directors were genuinely resident abroad and took the decisions there, the company would be non resident, but it could still have a UK taxable presence if it traded through a UK office or agent.

What mistakes cause residence disputes?

  • Assuming a UK company stops being UK resident when its owner emigrates. Only a treaty tie breaker can do that, and INTM120070 notes that a company ceasing to be resident must give notice under section 109B TMA 1970.
  • Bringing a foreign company into UK residence by accident, because the people who really run it live and work in the UK.
  • Board minutes that record approvals without showing where the decisions were reached.
  • Subsidiary boards that simply implement group instructions; see also transfer pricing for smaller companies and group relief, where residence affects which companies qualify.
  • Overlooking the personal tax position of the directors themselves, covered in our guide to non resident directors and PAYE.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.