UK and International Tax news

Bayfine UK And Double Tax Relief Update

Wednesday 3rd August 2011

In March 2011, the Court of Appeal held in Bayfine UK v HMRC [EWCA 304/2011] that a UK resident company could not claim double tax relief or unilateral relief in the UK for US tax paid by its US parent on the same profits under the US ‘check the box’ provisions, thereby reversing the decision of the High Court which, in March 2010, had reversed the 2008 decision of the Special Commissioner.

The High Court had previously held in favour of the taxpayer and that the US had primary taxing rights.  Not surprisingly, the Court of Appeal disagreed and decided that the UK has primary taxing rights and HMRC was not bound to give relief for US tax paid under the treaty or under unilateral relief provisions.

However the Court of Appeal did find in favour of the taxpayer with regard to the scope of s.795A [albeit academic in this case] requiring a taxpayer claiming unilateral relief to take reasonable steps to minimize the foreign tax liability before credit can be given in the UK.  

Leave to appeal to the Supreme Court has now been refused so the Court of Appeal decision is final.   

If you would like further details of this case, please contact Keith Rushen on +44 (0)20 7486 2378.

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