How does section 5 of the Income Tax Act 2007 prevent double taxation of company income?

Section 5 works together with section 3 of the Corporation Tax Act 2009 to switch off income tax provisions for company income that falls within the corporation tax charge. This ensures there is no overlap between the two taxes, so a company's income is only subject to one charge.

Which non-UK-resident company income is excluded from income tax under section 5?

Non-UK-resident company income is excluded from income tax where it is chargeable to corporation tax or would be but for a specific exemption. This typically covers trading income arising through a UK permanent establishment, or income from property or rights used by or held for that establishment.

Does the income tax exclusion under section 5 apply when a company acts as a trustee?

No. Where a company receives income in a fiduciary or representative capacity, such as acting as a trustee or nominee, that income remains subject to income tax in the normal way. The section 5 exclusion from income tax applies only to the company's own beneficial income.

Are UK-resident companies ever subject to income tax on their own income?

Generally no. UK-resident companies fall within the corporation tax regime for all their income, so section 5 excludes that income from the income tax charge. The only exception is where the company receives income in a fiduciary or representative capacity, which remains subject to income tax.

Income Tax Act 2007 section 5

Income tax and companies

Section 5 establishes that company income which falls within the corporation tax charge is excluded from the income tax charge, ensuring that the same income is not subject to both taxes.

Companies do not pay income tax on income that is within the scope of corporation tax
UK-resident companies are generally within the corporation tax regime for all their income
Non-UK-resident companies fall within the corporation tax regime where they trade through a UK permanent establishment or hold UK property or rights connected with that establishment
The exclusion from income tax does not apply where a company receives income in a fiduciary or representative capacity, such as acting as a trustee or agent

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