A UK company stays UK resident by incorporation. What a US-based director changes is US permanent establishment risk — and, in harder cases, dual residence the treaty sends to both authorities.
A UK limited company stays UK tax resident simply because it was incorporated in the UK — a director moving to the United States does not change that. What a US-based director can change is whether the company also becomes taxable in the United States: either through a US permanent establishment, or, in harder cases, because central management and control has drifted across the Atlantic and the company is dual resident. The US-UK treaty does not settle dual company residence with a tidy tie-breaker; it refers the case to the two tax authorities and withholds most treaty benefits until they agree.
HMRC's International Manual states the position plainly: a company is UK resident "if it is incorporated in the UK (with certain exceptions)" or if "the central management and control of its business is in the UK" (INTM120030). The incorporation rule sits at CTA09/S14 and CTA09/SCH2, originally introduced as FA88/S66.
That first test is the one founders forget when they relocate. Moving to Denver, hiring a US accountant and opening a US bank account does not unwind UK residence: the company keeps filing a CT600 and paying UK corporation tax on its worldwide profits.
The second test — the case law rule — runs the other way and can pull a foreign-incorporated company into UK residence. The authority is De Beers Consolidated Mines Ltd v Howe, quoted in INTM120060: a company resides "where its real business is carried on … and the real business is carried on where the central management and control actually abides". So a Delaware corporation whose real decisions are taken over a kitchen table in Islington can be UK resident on the case law test while remaining US domestic by incorporation. That is the mirror case, and it produces real dual residence.
HMRC's approach, set out in INTM120210, is a question of fact, not of paperwork. The manual distinguishes operational management, executive headquarters and "the pinnacle" — the body that sets policy — and asks where that top layer actually sits.
Legal authority is the starting point, not the finish. HMRC's guidance requires "actual participation … though it may not go beyond passive oversight and tacit control". A board holding power on paper but exercising none of it does not hold central management and control — the point in Unit Construction Co Ltd, where the parent had taken over in substance. HMRC's summary is blunt: "the business is not the less managed in London because it ought to be managed in Kenya."
INTM120180 is precise: "The place of directors' meetings is significant as an indication of the place of central management and control if, but only if, the board of directors does have the controlling power and exercises that power wholly or mainly at board meetings."
The same page closes off the workaround: a board "must, however, have real control. This is unlikely if it is made up partly of 'stooge' directors recruited simply to give the appearance of control."
HMRC reproduces Statement of Practice 1/90 at INTM120200, and the distinction it draws decides most real cases. Where a parent exerts influence through "the powers which a sole or majority shareholder has in general meetings", HMRC "would not seek to argue that central management and control of the subsidiary is located where the parent company is resident". But where a board "merely rubber stamps the parent company's decisions without giving them any independent consideration of its own", HMRC concludes the subsidiary "has the same residence for tax purposes as its parent" — having regard to "the degree of autonomy which those directors have in conducting the company's business".
Article 4(1) of the US-UK double taxation convention defines a resident of a Contracting State as any person liable to tax there "by reason of his domicile, residence, citizenship, place of management, place of incorporation, or any other criterion of a similar nature". Both incorporation and place of management appear on that list — which is precisely how a company ends up resident in both states.
Individuals get a cascading tie-breaker in Article 4(4): permanent home, centre of vital interests, habitual abode, nationality. Companies get nothing of the sort. Article 4(5) provides that where a person other than an individual is resident in both States, "the competent authorities of the Contracting States shall endeavour to determine by mutual agreement the mode of application of this Convention to that person."
Then the sting: "If the competent authorities do not reach such an agreement, that person shall not be entitled to claim any benefit provided by this Convention", other than those in Article 24(4), Article 25 and Article 26.
So there is no self-assessed answer. Until the authorities agree, the company cannot rely on Article 7 to keep business profits out of US tax, nor on Article 10 to reduce withholding or the branch profits tax.
Nor does HMRC's own rule rescue the position automatically. CTA09/S18 treats a "treaty non-resident" company as not UK resident, and HMRC's guidance notes it can apply that rule unilaterally where a tie-breaker is objective, such as place of effective management — but "competent authority agreement is required for standard tie-breakers based on bilateral discussion". The US-UK company tie-breaker is the bilateral kind. Dual residence is therefore a state to avoid by design, not a coin toss to resolve later.
For most UK companies with an American director, residence never moves. The live issue is a US permanent establishment, because that is what switches on US taxing rights under Article 7(1): business profits are taxable only in the company's home state "unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein".
Article 5(1) defines a PE as "a fixed place of business through which the business of an enterprise is wholly or partly carried on". Article 5(2) lists what the term "includes especially", and the first item is the one to read twice: "a place of management". A director running the company from a dedicated home office in the United States sits squarely in that language.
Article 5(5) reaches activity with no fixed premises at all. Where a person other than an independent agent acts on behalf of an enterprise and "has and habitually exercises in a Contracting State an authority to conclude contracts that are binding on the enterprise", the enterprise is deemed to have a PE there for that person's activities.
Two words carry the weight. Habitually — one negotiated deal is not a pattern. Binding — the test looks at substance, so a director who negotiates every material term and posts the contract to London for signature is on dangerous ground. Article 5(6) excepts genuinely independent agents acting in their own ordinary course of business, which rarely describes a director or employee.
Article 5(4) deems the term not to include a fixed place of business maintained solely for storage, display or delivery of goods; purchasing goods or collecting information; or "carrying on, for the enterprise, any other activity of a preparatory or auxiliary character". Market research and attending trade shows sit comfortably inside this. Closing revenue does not.
For the wider picture, see our guide to permanent establishment risk when hiring or selling abroad, and our note on what a US employer owes when staff work from the UK for the reverse direction.
Form 1120-F. A foreign corporation must file if it "was engaged in a trade or business in the United States" or had income treated as effectively connected with one. It is due by the 15th day of the 4th month after year end if the company maintains a US office, and the 15th day of the 6th month if it does not (Instructions for Form 1120-F).
Tax on effectively connected income. ECI is "taxed at the same 21% tax rate that applies to domestic corporations", after allowable deductions — unlike the 30% gross-basis charge on US-source income under section 881(a), which allows no deductions at all.
Branch profits tax. Section 884(a) imposes a 30% tax on after-tax effectively connected earnings and profits not reinvested in the US trade or business by year end, measured by the "dividend equivalent amount". Article 10(8) of the treaty caps that tax at the Article 10(2)(a) rate — 5% — for a company that qualifies. Qualification is not automatic: the company must satisfy the treaty's limitation on benefits article and disclose the position on Form 8833, with a $10,000 penalty under IRC 6712 for failing to file it.
Protective returns. The point most often missed. A foreign corporation that does not file "will lose the right to take deductions and credits against effectively connected income". Where a company concludes it has no US liability — including because its income is not attributable to a PE under a treaty — the IRS instructions say it "should also file a protective return", preserving deductions and credits under Regulations section 1.882-4(a)(3)(vi) should that conclusion prove wrong. A return is generally timely for this purpose if filed no later than 18 months after the due date.
A treaty also binds only the federal government. States set their own nexus rules, and a director's presence, payroll or property in a state can create a filing obligation where no federal PE exists.
A UK-incorporated software company has two directors. One is in London; the founder and majority shareholder has moved to Texas, works from a dedicated office there, and negotiates and closes the company's North American contracts.
UK side. The company remains UK resident by incorporation. On taxable profits of £400,000, the Financial Year 2026 main rate of 25% applies to profits over £250,000, so UK corporation tax is £100,000; the 19% small profits rate and Marginal Relief apply only below £250,000 (GOV.UK).
US side. The Austin office is a fixed place of business through which the business is partly carried on, and the founder habitually concludes binding contracts there. Articles 5(1)-(2) and 5(5) point the same way: a US PE exists. Suppose attribution under Article 7(2) gives $150,000 of profit to the PE.
The gap between $5,925 and $35,550 is the value of qualifying for treaty benefits and disclosing correctly. Now change one fact: make the company dual resident, with no competent authority agreement yet under Article 4(5). Article 10 is unavailable, so the 30% figure is the live one — and Article 7 no longer shields any profits. The UK side then relieves double tax under Article 24, subject to the usual credit limits; our explainer on how the US-UK treaty prevents double taxation covers the mechanics.
| Fact pattern | UK resident? | US exposure | Action |
|---|---|---|---|
| UK company; sole director relocates to the US and decides everything there | Yes — incorporation (CTA09/S14); but central management and control has moved out | Place of management PE very likely; dual residence possible | Governance review; assess Form 1120-F; do not assume the treaty fixes residence |
| UK company; US-based director habitually negotiates and closes customer contracts | Yes | Dependent agent PE — Article 5(5) | Attribute profit under Article 7(2); file Form 1120-F; review delegated authority |
| UK company; US-based staff do market research only | Yes | Likely excluded as preparatory or auxiliary — Article 5(4)(d),(e) | Document the scope; consider a protective 1120-F |
| US corporation; all real decisions taken by directors in the UK | Yes — case law rule; also US domestic by incorporation | Dual resident; Article 4(5) mutual agreement needed | Escalate; treaty benefits at risk until the authorities agree |
1. Decide where the company is to be managed, and write it down. A one-page board policy stating that central management and control is exercised in the UK anchors everything else.
2. Hold real board meetings there, with a quorum physically present, on a regular calendar.
3. Give the board things to decide. Budgets, pricing, borrowing, major contracts, senior hiring and dividend policy should reach it before the fact.
4. Keep minutes that show deliberation — options considered, questions asked, decisions changed. Minutes recording only approvals evidence the wrong thing.
5. Delegate by written authority, and cap it. If a US-based director runs sales, define what they may commit the company to and require UK approval above a threshold.
6. Audit reality against paperwork annually, and register any US filing obligation on your compliance calendar, including a protective Form 1120-F where the position is finely balanced.
Any company with directors on both sides of the Atlantic needs a documented governance review before a dispute makes the facts unhelpful. Central management and control is decided on evidence gathered after the event — minutes, calendars, travel records — and evidence created retrospectively is worth little. Positions of this kind go to a human specialist by default at our firm: a licensed CPA or Enrolled Agent reviews and signs off the US side, and an ACCA-qualified accountant reviews the UK side.
This is general information, not advice, and company residence turns entirely on facts specific to your board. If a director or controlling shareholder lives in a different country from the company, the moment to look at it is now — while you can still shape the evidence by changing how the board works. Related reading: how a US LLC is taxed when the owner is UK resident and our overview of US-UK cross-border business tax. For a structured governance and residence review, you can book a consultation.