Bayfine UK v HMRC

Bayfine UK v HMRC

The profit in question arose in the US based on all substantive factors; Bayfine UK is entitled to unilateral relief under section 790 ICTA 1988 and to relief under the Treaty for US Federal Income Tax paid by Bayfine DE Inc. Section 795A does not require Bayfine UK to take unreasonable steps or alter the...

Source-derived case information.

Parties
Appellant: Bayfine UK; Respondent: HMRC
Jurisdiction
England and Wales
Judgment Date
23 March 2010
Procedural Posture
Tax Appeal / High Court Appeal From Special Commissioners
Outcome
Appeal allowed
Legal Topics
Double Taxation Relief, Unilateral Relief, Treaty Interpretation, Corporation Tax, Foreign Tax Credit
Tax Law International Taxation Double Taxation Relief Unilateral Relief Treaty Interpretation Corporation Tax Foreign Tax Credit

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Parties

Bayfine UK

Appellant

HMRC

Respondent

Procedural Posture

Tax Appeal / High Court Appeal From Special Commissioners

Legal Issues

  1. 1 Whether Bayfine UK is entitled to unilateral relief under section 790 ICTA 1988 for US Federal Income Tax paid by Bayfine DE Inc on the same profit taxed in the UK
  2. 2 Whether Bayfine UK is entitled to relief under the Double Taxation Relief (Taxes on Income) (the United States of America) Order 1980 (the Treaty) for US Federal Income Tax paid by Bayfine DE Inc
  3. 3 Whether section 795A ICTA 1988 limits the credit for foreign tax in these circumstances

Ratio Decidendi

The profit in question arose in the US based on all substantive factors; Bayfine UK is entitled to unilateral relief under section 790 ICTA 1988 and to relief under the Treaty for US Federal Income Tax paid by Bayfine DE Inc. Section 795A does not require Bayfine UK to take unreasonable steps or alter the transaction to minimise foreign tax. The Commissioners erred in law in their approach to the source of income and the application of the Treaty.

Court Disposition

Appeal allowed

Orders

  • Bayfine UK's appeal is allowed on issues 1 and 2; HMRC's contentions on issue 3 are dismissed.