UK and International Tax news

HMRC Changes View On Residence Article In DTAs

Sunday 20th December 2015

HMRC has recently announced an agreement reached with Jersey on the interpretation of company residence tie breaker, para 2(1)(f), of the 1952 UK – Jersey Double Taxation Agreement.

Following a review of other DTAs including identical or very similarly worded provisions, HMRC says it now takes the view that the better interpretation of the equivalent provisions in these DTAs is that they do include a tie-breaker clause to decide where a company is to be treated as resident for the purposes of the affected DTAs.

HMRC’s previous view was that a dual-resident company, e.g. a company resident in the UK by virtue of incorporation and resident in the other jurisdiction by virtue of management and control, was not a resident of either jurisdiction under the terms of the provisions and so was outside the scope of the DTA. HMRC now takes the view that these provisions should be read as treating such a dual-resident company as a resident of the jurisdiction in which it is managed and controlled, for the purposes of applying the affected DTAs. In cases where the company is managed and controlled in both the UK and the other jurisdiction, it will remain outside the scope of the DTA.

There are 16 DTAs affected by HMRC’s change of view and these include Antigua, Belize, Brunei, Burma, Greece, Grenada, Guernsey, Isle of Man, Jersey, Kiribati, Malawi, Monserrat, St Kitts & Nevis, Sierra Leone, Solomon Islands and Tuvalu.

If you would like to discuss the application of the above change to specific circumstances, please contact Keith Rushen on 0207 486 2378.

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