Corporation Tax Act 2010 section 1143

Preparatory or auxiliary activities

Section 1143 explains when a company's activities in a territory are considered merely preparatory or auxiliary and therefore do not give rise to a permanent establishment in that territory.

• A company does not have a permanent establishment in a territory merely because it maintains a fixed place of business there, or an agent acts there on its behalf, provided the activities are only preparatory or auxiliary in nature and are not part of a fragmented business operation.
• Activities count as part of a fragmented business operation if the company (or a closely related person) carries on complementary functions forming a cohesive business operation, and the combined result goes beyond what is merely preparatory or auxiliary, or a permanent establishment already exists through one of those functions.
• Two persons are considered closely related if one can direct the other's actions, both act under a third party's direction, or the 50% investment condition is met — meaning one holds a 50% investment in the other, or a third party holds 50% in both.
• Examples of preparatory or auxiliary activities include using facilities for storing, displaying or delivering goods, maintaining stock for storage, display, delivery or processing by others, and purchasing goods or collecting information for the company.