Change of view on the interpretation of the residence articles in sixteen Double Taxation Agreements
Updated 24 June 2022
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HMRC has today announced an agreement reached with Jersey about the interpretation of paragraph 2(1)(f) of the 1952 Jersey-UK Double Taxation Agreements (DTA) (company residence tie-breaker).
Following a review of other DTAs including identical or very similarly-worded provisions, HMRC now takes the view that the better interpretation of the equivalent provisions in these DTAs is that they include a tie-breaker clause to decide where a company is to be treated as resident for the purposes of the affected DTAs. This represents a change of view.
HMRC’s previous view was that a dual-resident company — for example, 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. A schedule of the affected DTAs and provisions is set out:
| Country | Paragraph |
|---|---|
| Antigua (1947) | Paragraph 2(1)(g) |
| Belize (1947) | Paragraph 2(1)(g) |
| Brunei (1950) | Paragraph 2(1)(g) |
| Myanmar (Burma) (1950) | Article 2(1)(g) |
| Greece (1953) | Article 2(1)(g) |
| Grenada (1949) | Paragraph 2(1)(g) |
| Guernsey (1952) | Paragraph 2(1)(g) |
| Isle of Man (1955) | Paragraph 2(1)(g) |
| Jersey (1952) | Paragraph 2(1)(f) |
| Kiribati (1950) | Paragraph 2(1)(g) |
| Malawi (1955) | Article 2(1)(g) |
| Monserrat (1947) | Paragraph 2(1)(g) |
| St Kitts & Nevis (1947) | Paragraph 2(1)(g) |
| Sierra Leone (1947) | Paragraph 2(1)(g) |
| Solomon Islands (1950) | Paragraph 2(1)(g) |
| Tuvalu (1950) | Paragraph 2(1)(g) |
HMRC
30 November 2015