UK changes interpretation of corporate tie-breaker clause for residency in existing tax treaties

The UK’s HM Revenue and Customs (HMRC) on November 30 announced that it has changed its interpretation of the company residence tie breaker clause in the Jersey-UK tax treaty and in 15 other tax treaties that have similarly worded clauses.

HMRC’s previous view was that a dual resident company, such as a company that resident in one treaty country by virtue of incorporation and in the other country by virtue of the management and control test, was outside the scope of the tax treaty.

HMRC’s new view is that such a dual-resident company is a resident of the jurisdiction in which it is managed and controlled. However, where a company is managed and controlled in the two jurisdictions, it will be considered to be outside the scope of the tax treaty.

This change in position will apply to the UK’s tax treaties with the following nations: Antigua, Belize, Brunei, Burma, Greece, Grenada, Guernsey, Isle of Man, Jersey, Kiribati, Malawi, Monserrat, St Kitts & Nevis, Sierra Leone. Solomon Islands, and Tuvalu.

See:

• Change of view on the interpretation of paragraph 2 of the Jersey- UK Double Taxation Arrangement

• Release