Irish Bank Resolution Corporation Ltd (in special liquidation) and Irish Nationwide Building Society v The Commissioners for HM Revenue and Customs
| Jurisdiction | UK Non-devolved |
| Judge | Mr Justice Marcus Smith,Judge Herrington |
| Neutral Citation | [2019] UKUT 0277 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Subject Matter | Tax,9 October 2019 |
| Date | 09 October 2019 |
| Published date | 09 October 2019 |
[2019] UKUT 0277 (TCC)
Appeal numbers: UT/2017/0178
UT/2017/0179
CORPORATION TAX – UK branches of Irish banks – interest expense –
whether deductible – attribution of notional capital – ICTA section
11AA(3)(b) – construction and application of UK – Ireland DTC
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
(1) IRISH BANK RESOLUTION CORPORATION
LIMITED
(in special liquidation)
(2) IRISH NATIONWIDE BUILDING SOCIETY
Appellants
- and -
THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS
Respondents
TRIBUNAL:
The Honourable Mr Justice Marcus Smith
Judge Timothy Herrington
Sitting in public at The Rolls Building, Fetter Lane, London EC4A 1NL on 15 and
16 May 2019
Philip Baker, QC and Imran S Afzal, instructed by KPMG Belfast, for the
Appellants
David Milne, QC and Jonathan Bremner, QC, instructed by the General Counsel
and Solicitor to HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2019
DECISION
A. TAXATION OF COMPANIES NOT RESIDENT IN THE UNITED
KINGDOM ACCORDING TO UNITED KINGDOM LAW
1. In the United Kingdom, as in many other jurisdictions, a company resident
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in the United Kingdom is within the charge to corporation tax in relation to all of
its profits, wherever arising.
2. Companies not resident in the United Kingdom are generally outwith the
charge to corporation tax, unless a company carried on a trade in the United
Kingdom through a permanent establishment in the United Kingdom. Section 11
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of the Income and Corporation Taxes Act 1988 (“ICTA 1988”), as in force at the
material times, provided:
“(1) A company not resident in the United Kingdom is within the charge to corporation
tax if, and only if, it carries on a trade in the United Kingdom through a permanent
establishment in the United Kingdom.
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(2) If it does so, it is chargeable to corporation tax, subject to any exceptions provided
for by the Corporation Tax Acts, on all profits, wherever arising, that are
attributable to its permanent establishment in the United Kingdom.”
3. Section 148(1)(a) of the Finance Act 2003 (“FA 2003”) defines a
“permanent establishment” as “a fixed place of business…through which the
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business of a company is wholly or partly carried on”.
4. As it stands, section 11 ICTA 1988 provides no guidance as to what profits
are – and what profits are not – attributable to a corporation’s permanent
establishment. Some guidance is provided by section 11AA ICTA 1988, inserted
into that statute by section 149(2) FA 2003. So far as material, section 11AA
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provides:
“(1) This section provides for determining for the purposes of corporation tax the
amount of the profits attributable to a permanent establishment in the United
Kingdom of a company that is not resident in the United Kingdom (“the non-
resident company”).
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(2) There shall be attributed to the permanent establishment the profits it would have
made if it were a distinct and separate enterprise, engaged in the same or similar
activities under the same or similar conditions, dealing wholly independently with
the non-resident company.
(3) In applying subsection (2) –
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(a) it shall be assumed that the permanent establishment has the same credit
rating as the non-resident company, and
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