What is disregarded company income under section 816 of the Income Tax Act 2007?

Disregarded company income is income earned by a non-UK resident company that is excluded from the company's UK income tax liability. It includes disregarded savings and investment income, disregarded annual payments, and income from transactions through independent UK-based brokers or investment managers meeting statutory conditions.

What conditions must a UK broker meet for income to qualify as disregarded company income?

The broker must satisfy the independent broker conditions set out in section 817 of the Income Tax Act 2007. These require the broker to act as a genuinely independent agent in the ordinary course of business, operating at arm's length without ownership connections to the non-UK resident company.

Can the Treasury add new categories of disregarded company income?

Yes. Section 816 grants the Treasury the power to designate additional descriptions of income as disregarded company income through regulations. This allows the framework to be expanded without requiring primary legislation, ensuring it can adapt to new types of cross-border income arrangements.

What happens if a UK investment manager does not meet the independence conditions?

If the independent investment manager conditions in sections 818 to 824 are not satisfied, the income arising from transactions through that manager will not be disregarded. This means the non-UK resident company's income may fall within the charge to UK income tax under this chapter of the Act.

Income Tax Act 2007 section 816

Meaning of "disregarded company income"

Section 816 defines which types of income earned by a non-UK resident company qualify as "disregarded company income" — meaning income that is effectively excluded when determining the company's UK income tax liability.

Certain savings and investment income and annual payments of a non-UK resident company are automatically treated as disregarded company income
Income from transactions carried out through a UK-based broker or investment manager acting independently in the ordinary course of business can also be disregarded, but only if specific independence conditions are satisfied
For brokers, the "independent broker conditions" must be met; for investment managers, the "independent investment manager conditions" must be met — both sets of conditions ensure the intermediary is genuinely acting at arm's length
The Treasury has power to designate additional categories of income as disregarded company income through regulations

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