Interpretation of Double Taxation Agreements
This appeal is concerned with the interpretation and application of a double taxation agreement between the United Kingdom and the United States of America. A had been a member of an LLP in Delaware, and he was resident within the UK, but not domiciled here. He was liable to UK income tax on his UK sourced income and on foreign income remitted to the UK. He was non-resident in the US for US tax purposes, but was liable to US federal and state taxes on his US sourced income.
Held: The appeal succeeded. If, then, Mr Anson was entitled to the share of the profits allocated to him, rather than receiving a transfer of profits previously vested (in some sense) in the LLC, it followed that his ‘income arising’ in the US was his share of the profits. That was the income liable to tax under UK law, to the extent that it is remitted to the UK. There is no dispute as to the income which was taxed in the US: that was Mr Anson’s share of the profits of the LLC. Mr Anson’s liability to UK tax was therefore to be computed by reference to the same income as was taxed in the US. He accordingly qualified for relief under article 23(2)(a).
The express treatment of underlying tax on dividends reflected the changes necessitated by the UK’s adoption of corporation tax in place of the previous imputation system. Relief for underlying tax had previously been allowed, providing similar relief in the UK to that available in the US under article 13(1). Once the imputation system was abandoned, relief for underlying tax logically went with it.
‘article 23(2) was intended to provide similar relief to that available in the US under article 23(1), as had been the case under the 1945 Convention; and it was always clear from the Biddle decision that the US did not afford relief for underlying tax unless the Convention provided otherwise (as article 13(2) of the 1945 Convention in its original form did, but the later provisions did not). The argument, and this ground of appeal, must therefore be rejected.’
Lord Reed said: ‘Article 31(1) of the Vienna Convention requires a treaty to be interpreted ‘in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose’. It is accordingly the ordinary (contextual) meaning which is relevant. As Robert Walker J observed at first instance in Memec [1996] STC 1336 at 1349, 71 TC 77 at 93, a treaty should be construed in a manner which is ‘international, not exclusively English’.
That approach reflects the fact that a treaty is a text agreed upon by negotiation between the contracting governments. The terms of the 1975 Convention reflect the intentions of the US as much as those of the UK. They are intended to impose reciprocal obligations, as the background to the UK/US agreements from 1945 onwards makes clear.’
Lord Neuberger, President, Lord Clarke, Lord Sumption, Lord Reed, Lord Carnwath
[2015] UKSC 44, [2015] 4 All ER 288, [2015] STI 2019, [2015] BTC 21, 17 ITL Rep 1007, [2015] STC 1777, UKSC 2013/0068
Bailii, Bailii Summary, SC, SC Summary
UK/US Double Taxation Convention of 31 December 1975 24(4)(a)
England and Wales
Citing:
At UTTC (1) – HMRC v George Anson UTTC 3-Aug-2011
UTTC Income tax – double taxation – United Kingdom and United States – whether computation by reference to the same income or profits – whether taxpayer entitled to profits as they arise . .
At UTTC (2) – HMRC v Anson UTTC 16-Feb-2012
UTTC Income tax – whether taxpayer can invoke section 739 of the Income and Corporation Taxes Act 1988 as against HMRC – effect of sections 739-741 – can costs be awarded in the Upper Tribunal on an appeal from . .
Appeal from – Revenue and Customs v Anson CA 12-Feb-2013
The revenue sought to levy income tax on the taxpayers share of revenue in a Delaware Limited liability company. In the US the company would itself be liable for and pay all tax on the members’ profits. Mr Anson was resident but not domiciled in the . .
Cited – Income Tax Commissioners for City of London v Gibbs HL 1942
Lord Macmillan considered the construction of the word ‘person’ in the context of a partnership under Scots law: ‘The word ‘person’ is in the singular, but it includes the plural and also any body of persons corporate or unincorporate: . .
Cited – Arif v Excess Insurance Group Ltd 1987
. .
Cited – Mitchell v Scottish Eagle Insurance Ltd 1997
. .
Cited – Memec Plc v Inland Revenue Commissioners ChD 7-Nov-1996
Double taxation relief was not available for a distribution by a German company to its UK partner.
An international treaty should be construed in a manner which is ‘international, not exclusively English’. . .
Cited – Purchase (H M Inspector of Taxes) v Stainer’s Executorsz HL 29-Nov-1951
HL Income Tax, Schedule D – Film actor and producer-Remuneration including right of participation in profits of, or receipts from, particular films-Sums in respect of such participations paid to executors – . .
Cited – Memec Plc v Commissioners of Inland Revenue CA 9-Jun-1998
Memec plc, was a partner in a German silent partnership (stille Gesellschaft). The partnership had no separate legal personality, but was a contractual arrangement under which Plc had the right to receive a share of the profits of the business . .
At FTTTx – Swift v Revenue and Customs FTTTx 22-Feb-2010
FTTTx DOUBLE TAXATION RELIEF – individual investor in Delaware LLC – whether entitled to the profits as they arise – yes – accordingly the Appellant is entitled to credit for US tax paid by him, the LLC being . .
Cited – Baker v Archer-Shee HL 26-Jul-1927
‘The ultimate question in this Appeal turns upon the description which in income tax phraseology ought properly to be applied to the moneys paid during the two years in question by the Trust Company of New York to the order of Lady Archer-Shee, the . .
Cited – Archer Shee v Garland HL 15-Dec-1930
The parties disputed the taxpayer’s liability to income tax on income coming due to her on an American based family trust.
Held: A beneficiary in a fully administered deceased estate has an equitable interest in property which is the subject . .
Cited – Gilbertson v Fergusson CA 1881
. .
Cited – Colquhoun v Brooks 1889
A partner’s share of the profits of a foreign partnership, are to be treated as income from a foreign possession . .
Cited – Barnes v Hely Hutchinson HL 1940
UK taxes had not been paid by the overseas company paying a dividend, but had been by the UK companies in which it held shares. The dividends received by the taxpayer were preference dividends rather than ordinary dividends, and were therefore paid . .
Cited – Income Tax Commissioners for City of London v Gibbs HL 1942
Lord Macmillan considered the construction of the word ‘person’ in the context of a partnership under Scots law: ‘The word ‘person’ is in the singular, but it includes the plural and also any body of persons corporate or unincorporate: . .
Cited – Riverstone Meat Co Pty Ltd v Lancashire Shipping Co (‘The Muncaster Castle’) HL 1961
Persons employed by a carrier in the work of keeping or making a vessel seaworthy are the carrier’s agents whose diligence or lack of it is attributable to the carrier. A shipowner’s or carrier’s duty under Article III, Rule 1 would not start and he . .
Cited – MacKinlay (Inspector of Taxes) v Arthur Young McClelland Moores and Co HL 23-Nov-1989
Expenditure does not qualify for deduction if the object of the expenditure was to serve another private purpose in addition to the business purpose for which it was purportedly incurred.
HL Income Tax – . .
Cited – Canadian Eagle Oil Co Ltd v The King 1946
. .
Cited – The Corfu Channel Case ICJ 22-May-1947
Assessment of the amount of compensation due from the people’s Republic of Albania to the United Kingdom of Great Britain and Northern Ireland.
The court should be reluctant to conclude that a provision in an agreement made between two . .
Cited – Duckering (Inspector of Taxes) v Gollan HL 8-Apr-1965
HL Income Tax, Schedule D – Double taxation relief – Tax credit – Whether tax paid – in respect of – income of year of assessment or basis year – Income Tax Act, 1952 (15 and 16 Geo. VI and 1 Eliz. II, c. 10), . .
Cited – Strathalmond v Inland Revenue Commissioners 1972
The taxpayer’s wife was an American citizen resident for tax purposes in the United Kingdom. Because of her American citizenship, however, she was not resident in the United Kingdom for the purposes of the Double Taxation Agreement between the . .
Cited – Bayfine UK v HM Revenue and Customs CA 23-Mar-2011
The revenue appealed against the confirmation of the grant of double taxation relief to the taxpayer company. The Court was asked whether the UK company was entitled under article 23(2)(a) to a credit, to set against UK tax on its profits, in . .
Cited – Padmore v Inland Revenue Commissioners 1987
. .
Cited by:
Cited – Fowler v Revenue and Customs (Income Tax/Corporation Tax : Employment Income) FTTTx 13-May-2016
FTTTx INCOME TAX – Car made available to employee – whether benefit in light of Apollo Fuels Ltd: yes – whether capital contribution made: no – whether mileage allowance at 40p per mile due: no – disposition of . .
Cited – Fowler v Revenue and Customs SC 20-May-2020
The taxpayer, a diver resident in South Africa had undertaken engagements within UK waters and now disputed his liability to Income Tax using a deeming provision in section 5 of the 2005 Act being self employed.
Held: HMRC’s appeal succeeded. . .
Lists of cited by and citing cases may be incomplete.
Income Tax, International
Leading Case
Updated: 01 November 2021; Ref: scu.549903
