Part 24

Corporation Tax Acts definitions etc
Chapter 2

Permanent establishments

Circumstances where there is no permanent establishment

Preparatory or auxiliary activities
1143
1
If the condition in subsection (2) is met, a company is not regarded as having a permanent establishment in a territory by reason of the fact that—
a
a fixed place of business is maintained there for the purpose of carrying on activities for the company, or
b
an agent carries on activities there for and on behalf of the company.
2
The condition is that, in relation to the business of the company as a whole, the activities carried on are only of a preparatory or auxiliary character and are not part of a fragmented business operation.
2A
Activities are “part of a fragmented business operation” if—
a
they are carried on (whether at the same place or at different places in the same territory) by the company or a person closely related to the company,
b
they constitute complementary functions that are part of a cohesive business operation, and
c
subsection (2B) applies.
2B
This subsection applies if—
a
the overall activity resulting from the combination of the functions mentioned in subsection (2A)(b) is not activity that is only of a preparatory or auxiliary character, or
b
the company or a person closely related to the company has a permanent establishment in the territory by reason of carrying on any of those functions.
2C
A person who is not a company is to be treated for the purposes of subsection (2B)(b) as having a permanent establishment in a territory if, were the person a company, the person would have a permanent establishment in the territory.
2D
For the purposes of this section, one person (“A”) is closely related to another person (“B”) if—
a
A is able to secure that B acts in accordance with A’s wishes (or vice versa),
b
B can reasonably be expected to act, or typically acts, in accordance with A’s wishes (or vice versa),
c
a third person is able to secure that A and B act in accordance with the third person’s wishes,
d
A and B can reasonably be expected to act, or typically act, in accordance with a third person’s wishes, or
e
the 50% investment condition is met in relation to A and B.
2E
The 50% investment condition is met in relation to A and B if—
a
A has a 50% investment in B (or vice versa), or
b
a third person has a 50% investment in each of A and B,
and section 259ND of TIOPA 2010 (meaning of “50% investment”) applies for the purposes of determining whether a person has a “50% investment".
3
In this section “activities of a preparatory or auxiliary character” include (without prejudice to the generality of that expression)—
a
the use of facilities for the purpose of storage, display or delivery of goods or merchandise belonging to the company,
b
the maintenance of a stock of goods or merchandise belonging to the company for the purpose of storage, display or delivery,
c
the maintenance of a stock of goods or merchandise belonging to the company for the purpose of processing by another person, and
d
purchasing goods or merchandise, or collecting information, for the company.
Pt. 24 Ch. 2 applied by 2007 c. 3, s. 1007A (as inserted (with effect in accordance with Sch. 2 paras. 7(3), 8 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 2 para. 3(3); S.I. 2011/662, art. 2)
S. 1143(2A)-(2E) inserted (with effect in accordance with s. 21(5)(6) of the amending Act) by Finance Act 2019 (c. 1), s. 21(3)
Words in s. 1143(2) inserted (with effect in accordance with s. 21(5)(6) of the amending Act) by Finance Act 2019 (c. 1), s. 21(2)
Words in s. 1143(3) substituted (with effect in accordance with s. 21(5)(6) of the amending Act) by Finance Act 2019 (c. 1), s. 21(4)
Pt. 24 Ch. 2 applied by 2003 c. 1, s. 60I(2)(a) (as inserted (6.4.2021 for the tax year 2021-22 and subsequent tax years) by Finance Act 2020 (c. 14), Sch. 1 paras. 5, 24 (with Sch. 1 paras. 30-34))