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The concept of permanent establishment (PE) is important for international groups because it will often determine whether a company has sufficient activity in another jurisdiction to create a taxable presence there. For example, a company that is not resident in the UK will still be subject to UK corporation tax if it carries on a trade in the UK through a PE. Where it does so, it will be subject to UK corporation tax on all of the profits that are attributable to the UK permanent establishment. For more detailed coverage of the general rules, see the Permanent establishment guidance note.

In many cases, the focus will be on a company not creating a PE or minimising the profits that are attributable to that PE. However, in some cases, a company may specifically want to create a PE (for example, a UK company may want to take advantage of the branch profits exemption).

Outlined below is a suggested approach for tax advisers (both in-house and in practice) on how to