The Commissioners for HM Revenue and Customs v Aozora GMAC Investment Ltd
| Jurisdiction | UK Non-devolved |
| Judge | Mrs Justice Falk,Judge Jennifer Dean |
| Neutral Citation | [2022] UKUT 00258 (TCC) |
| Subject Matter | 23 September 2022 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Published date | 26 September 2022 |
UT Neutral citation number: [2022] UKUT 00258 (TCC)
UT (Tax & Chancery) Case Number: UT/2021/000142
Upper Tribunal
(Tax and Chancery Chamber)
Hearing date: 13 July 2022
Rolls Building, London
Judgment given on: 23 September 2022
Before
THE HONOURABLE MRS JUSTICE FALK
UPPER TRIBUNAL JUDGE JENNIFER DEAN
Between
THE COMMISSIONERS FOR HIS MAJESTY’S
REVENUE AND CUSTOMS
Appellants and
AOZORA GMAC INVESTMENT LIMITED
Respondent
Representation:
For the Appellants: James Rivett KC and Barbara Belgrano, Counsel, instructed by the General
Counsel and Solicitor for His Majesty’s Revenue and Customs.
For the Respondent: David Ewart KC, Counsel instructed by Eversheds Sutherland (International)
LLP
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DECISION
Introduction
1. This is an appeal by HMRC against a decision of the First-Tier Tribunal (“FTT”) released on 12
April 2021 (the “Decision”).
2. By the Decision, the FTT allowed the appeals of the Respondent (“Aozora”) against closure
notices issued by HMRC following enquiries into Aozora’s accounting periods ending 31 March
2007, 31 March 2008 and 31 March 2009.
3. The effect of each closure notice was to deny Aozora the unilateral double tax credit relief that
would otherwise have been available to it under section 790 of the Income and Corporation Taxes
Act 1988 (“ICTA”) on its US source interest income. HMRC’s view was that relief was not available
as a result of the application of section 793A(3) of ICTA to Article 23 of the Double Tax Convention
concluded between the US and the UK on 24 July 2001 (the “Tax Treaty”). The consequence was
that Aozora was not able to set off the US tax which had been charged on the interest and withheld
from the interest payments against its liability to UK corporation tax on that interest. The FTT
concluded that section 793A(3) did not apply to deny relief under section 790.
4. The appellants appeal with the permission of the FTT. Unless otherwise specified, references in
this judgment to numbers in square brackets are to paragraphs of the Decision, references to sections
are to sections of ICTA, and references to Articles are to Articles of the Tax Treaty.
Double taxation relief in outline
5. In brief outline, at the relevant time Part XVIII of ICTA governed double taxation relief in respect
of tax on income and chargeable gains. Chapter I of Part XVIII contain ed the “Principa l reliefs”.
Within that Chapter, section 788 provided for relief to be made available in accordance with the terms
of double taxation arrangements agreed with other territories, and section 790 provided for relief to
be granted by the UK unilaterally under its domestic law (so-called unilateral relief). Chapter II of
Part XVIII was entitled “Rules governing relief by way of credit”, and con tained provisions which
included section 793A.
6. Double taxation arrangements agreed with other territories are not straightforwardly incorporated
into domestic law. As explained by Lord Hoff mann in NEC Semi-Conductors Ltd & other test
claimants v Inland Revenue Commissioners [2007] UKHL 25; [2007] STC 1265 at [8]:
“… An international treaty does not give rise to any rights in English domestic law unless
incorporated by legislation. The EC Treaty is so incorporated, in its entirety, by the
European Communities Act 1972. But with DTCs
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the position is more complicated.
Section 788 of the 1988 Act provides that Her Majesty may by order in council declare
that arrangements made by a DTC shall ‘have effect’. But the result is not to make the
whole DTC part of English law. By s788(3) the arrangements shall have effect
‘notwithstanding anything in any enactment’ –
‘in relation to income tax or corporation tax in so far as they provide –
(a) for relief from income tax, or from corporation tax in respect of income or chargeable
gains; or (b) for charging the income arising from sources, or chargeable gains accruing
on the disposal of assets, in the United Kingdom to persons not resident in the United
Kingdom; or…(d) for conferring on persons not resident in the United Kingdom the
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Double taxation co nventions.
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