An evolving approach to corporate residence

HMRC has a range of tools that it can deploy to ensure that the UK gets its ‘fair share’ of taxable profits from offshore arrangements that have a UK nexus. Potential lines of attack include transfer pricing diverted profits tax and the controlled foreign company rules. The implementation of the recent BEPS related changes provides further ammunition such as the interest barrier and anti-hybrid rules.

But there is another – and much older – type of challenge that can be effective for HMRC in the right circumstances: challenging the tax residence of a non-UK incorporated company.

In our recent experience HMRC will routinely enquire into the residence position of non-UK companies where there is a significant UK connection. Given the current focus...