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Bayfine UK and double tax relief

The Court of Appeal took a purposive approach to interpreting the UK/US double tax treaty in Bayfine UK. Ed Denny and Adam Willman consider the implications of the decision

Background

It is possible for two entities resident in different jurisdictions to be taxed on the same income in those different jurisdictions.

A UK unlimited company wholly owned by a US parent may be treated as being ‘tax transparent’ for US income tax purposes under so-called ‘check the box’ regulations (these allow the parent to elect to have the subsidiary disregarded as a separate entity and its income taxed on the parent).

Where this occurs the same income is treated by the US and UK as belonging to different entities and the prospect of double taxation arises. A double taxation treaty is usually concerned with eliminating double taxation where...

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