8 min read
The company still thinks of itself as Irish. HMRC may not.
An Irish technology company has its headquarters in Dublin, employs its team in Ireland and files Irish corporation tax returns. On paper, little has changed. But its founder has moved to London and now runs much of the business from a home office in the United Kingdom. Contracts are discussed there. Commercial strategy is shaped there. Key decisions increasingly happen there. The UK permanent establishment framework was substantially reformed by Finance Act 2026, and the OECD published updated guidance on cross-border remote working in November 2025. Arrangements once regarded as straightforward remote working now sit within a more demanding analytical framework, and the instinctive response of many founder-led businesses, that the company is Irish incorporated, operates from Ireland and remains an Irish taxpayer, may no longer be sufficient on its own.
The question HMRC asks is different: has part of the company's business begun operating from the United Kingdom in a way that gives rise to UK corporation tax exposure. In practical terms, that enquiry is less about corporate identity and more about commercial reality. Tax authorities are less interested in where a company describes itself as being based than in where economically meaningful activity is actually taking place, and a company does not need a UK office, branch or local employees before the issue arises. A founder carrying out commercially significant activity from the United Kingdom with sufficient regularity brings the analysis into play regardless of how the corporate structure is described on paper.
The analysis under Finance Act 2026 turns on two questions: where business activity takes place and who is carrying it out, and the reforms have materially narrowed the arguments previously available to groups seeking to demonstrate that UK activity fell below the threshold for a taxable presence.
The first route focuses on place. An overseas company has a UK permanent establishment where business is carried on through a sufficiently stable UK location, and what matters is not whether a founder or employee happens to work from Britain but whether that location has become a place through which the company conducts meaningful business activity. A founder occasionally taking calls from a London flat sits in a different position from a founder consistently directing operations, negotiating commercial terms or managing customers from the same location, and the distinction between those two factual pictures is precisely what the permanent establishment analysis is designed to examine.
The second route focuses on people. Even where no fixed UK location exists, UK tax exposure arises where an individual in the United Kingdom habitually acts for the company in a commercially substantive way. Under the reforms introduced by Finance Act 2026, individuals who play the principal role leading to contracts that are routinely approved without material amendment create UK tax exposure even where legal execution happens elsewhere, and the historic comfort taken from contracts being formally signed offshore no longer carries the weight many groups have continued to place upon it. The practical consequence is direct: a contract signed in Dublin does not determine the outcome if the meaningful commercial work leading to that contract routinely occurs in London.
Finance Act 2026 also closed another argument that groups had used to limit their exposure. Previously, businesses could contend that individual strands of UK activity were too minor to matter when viewed separately, with marketing in one place, customer liaison in another and commercial support elsewhere. Anti-fragmentation rules now require connected activities to be assessed together where they form part of a coherent business operation, and several individually modest functions carry collective significance that each would not carry alone.
The OECD's November 2025 update to its Model Tax Convention addressed remote working arrangements directly for the first time, including situations where individuals work from homes, temporary accommodation and other locations outside the jurisdiction where the company is based, and the update came closer than any previous guidance to drawing a practical line between acceptable flexibility and genuine tax risk.
Most attention has focused on what appears to be a workable benchmark. The OECD suggests that where an individual works from a UK location for less than half of their total working time over a twelve-month period, that location would generally not be treated as a place of business of the company. Businesses should resist reading certainty into that language, because the OECD deliberately stopped short of creating a formal safe harbour and "generally" does considerable work in that formulation. Falling below the threshold does not guarantee safety and exceeding it does not automatically create UK tax exposure, but the more revealing point sits underneath the benchmark itself rather than in the percentage it sets.
The OECD's analysis turns on commercial rationale. Why is the individual working from the UK and what function does that arrangement serve for the business? A founder based in London because the company needs UK customer access, local market coverage or time zone alignment presents a different risk profile from a founder whose relocation reflects personal preference while the business remains operationally centred elsewhere, and that distinction matters because it suggests the analysis is becoming less mechanical and more commercial in its orientation. Counting days helps frame the question but is unlikely to determine the answer on its own, and HMRC has not yet incorporated the updated commentary into its domestic guidance. Where treaty language closely follows the OECD Model Convention, that commentary has historically carried interpretive influence, and waiting for HMRC to update its manuals before revisiting working arrangements is unlikely to prove a sound strategy.
For some founder-led businesses the permanent establishment question is only the beginning, and the more consequential question is whether the company itself has begun to look as though it is being managed from Britain rather than merely having a taxable presence there.
That shift does not happen through a formal decision. It emerges through the accumulation of ordinary commercial activity: the founder relocates, strategic conversations increasingly happen from London, financing decisions are approved there, commercial priorities are shaped there, and Irish governance remains formally in place while becoming increasingly procedural rather than decisive. At that point the analysis moves beyond permanent establishment and into corporate residence, which asks something more fundamental than whether part of the company's business is taxable in the United Kingdom. It asks where real control of the company sits, and the practical focus of that enquiry is not where board meetings are recorded or documents are signed but where the important decisions are genuinely being made.
Under Irish law, incorporation generally establishes Irish tax residence, although treaty provisions alter that outcome where another jurisdiction can credibly claim residence. If HMRC concludes that central management and control has shifted to the United Kingdom, the issue moves into the treaty residence framework under Article 4 of the Multilateral Instrument, discussed in our separate article on treaty residence and governance. The commercial implications are materially different from permanent establishment risk because permanent establishment exposes part of the company's profits to UK tax while a residence dispute raises the possibility of competing claims over the company itself, with treaty protection uncertain if the competent authorities cannot reach agreement.
By the time a founder's UK working arrangements raise questions about permanent establishment or residence, the same factual pattern is typically creating pressure across other parts of the structure simultaneously, and the issue is rarely confined to corporation tax alone.
A founder or senior employee spending sustained periods working from the United Kingdom triggers employment tax and payroll obligations where substantive duties are being carried out from the UK on an ongoing basis, and national insurance questions follow from the same factual position because work is physically being performed in Britain even where the employer remains overseas. Immigration considerations become equally relevant where arrangements initially viewed as temporary evolve into something more embedded, because what begins as occasional UK presence can become harder to distinguish from substantive employment activity as the pattern becomes established over time.
The fragmented advisory model that most groups apply to these questions, with tax advisers reviewing permanent establishment, employment teams considering payroll and immigration advice sought separately, addresses the same underlying factual pattern through three different lenses without anyone holding a view of how those positions interact. When the working arrangements are examined as a whole, whether through a transaction process, a regulatory enquiry or an employment dispute, the group is not presenting three separate and defensible positions. It is presenting a single factual record that was managed in parts and is now being read as a whole, and the gaps between those parts are more visible under examination than they were when the advice was given.
A founder who has been working from the United Kingdom for a sustained period without a structured review of permanent establishment, residence, employment tax and immigration has not avoided those questions. They have deferred them into a period when the working arrangements are more embedded, the evidential record is more established and the options for restructuring are more constrained than they would have been at the outset.
The practical objective is not to restrict legitimate UK-based activity or treat international working as inherently problematic, because cross-border teams, remote decision making and internationally mobile founders are part of ordinary commercial life. The difficulty is that working arrangements evolve while governance and tax assumptions remain fixed around an earlier version of how the business operated, and the distance between those two positions grows with each year that passes without a structured reassessment. A group that addresses the permanent establishment, residence, employment tax and immigration questions together, at the point where the working arrangements are becoming established rather than after they are fully embedded, is in a materially different position from one where the first structured examination of those questions coincides with the first external challenge to them.