Income Tax (Trading and Other Income) Act 2005 section 608MB

Exemption for certain bodies corporate that are transparent in full treaty territory

Section 608MB provides an exemption from the offshore income rules for certain corporate entities that are treated as transparent (i.e. not taxed separately from their members) in a territory that has a full double taxation treaty with the UK.

• The exemption applies to corporate bodies formed under the law of a territory with a full UK tax treaty, where the body is treated as transparent (not a separate taxable entity) under that territory's law
• The body must not be resident at any time during the tax year in a territory without a full tax treaty, and it must receive UK-derived amounts during the year
• All "relevant members" of the body must be resident in the relevant treaty territory throughout the entire tax year — if these conditions are met, the UK-derived amounts are disregarded when applying the offshore income rules under section 608A
• Where a member of the body is itself a transparent corporate entity formed in the same territory and meeting the same conditions, the exemption looks through that entity to its own underlying members to test residency

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