Taxation (International and Other Provisions) Act 2010 section 130

Interpreting provision about UK taxation of profits of foreign enterprises

Section 130 ensures that a common provision found in double taxation agreements — designed to limit each country's right to tax the business profits of residents of the other country — cannot be misread as preventing the UK from taxing the income of its own residents.

• Many double taxation agreements state that the profits of a foreign enterprise should only be taxed in the UK to the extent they are attributable to a UK permanent establishment.
• Section 130 clarifies that this rule does not prevent the income of a UK-resident person or company from being charged to income tax or corporation tax.
• There is an exception where specific partnership rules already apply: if a UK-resident individual's share of a firm's income is already taxable under section 858 of ITTOIA 2005, or a UK-resident company's share is taxable under section 1266(2) of CTA 2009, then section 130 does not override those provisions.
• Whether a person counts as UK-resident for these purposes is determined by the residence definition used in the relevant double taxation agreement itself.