UK profits and permanent establishments

Forthcoming change: In June 2023, HMRC opened a consultation on the ‘Reform of UK law in relation to transfer pricing, permanent establishment and Diverted Profits Tax (DPT)’. A summary of responses was published on 16 January 2024. The government is considering whether to align the domestic law PE definition and profit attribution rules more closely with the 2017 version of the OECD Model Tax Convention. The government is also considering whether to adopt the same position in relation to the UK’s tax treaty network. The consultation notes that, in particular, aligning the UK’s domestic legislation with the OECD Model Tax Convention would expand the circumstances in which a UK agency permanent establishment could be created. For more information, see News Analysis: TAMD 2023—consultation on reform of permanent establishment rules.

According to the government’s Corporate Tax Roadmap 2024, published at Autumn Budget 2024, it will open a ‘second-round consultation on reforms to the UK’s rules on transfer pricing, permanent establishments, and Diverted Profits Tax’ in due course. See News Analysis: Autumn Budget 2024—Tax analysis—International.

When a non-UK resident company does business in the