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HMRC internal manual

Double Taxation Relief Manual

Non-residents: UK income: Non-discrimination: Group income

ICTA88/S247 (group income) and ICTA88/S402 (group relief) apply only to companies which are resident in the United Kingdom. A non-discrimination Article may require that enterprises of one country whose capital is owned or controlled by residents of the other country are not to be subjected to more burdensome taxation or taxation requirements than those imposed on similar enterprises of the first country. This does not enable one United Kingdom resident company to

a) pay dividends without accounting for Advance Corporation Tax, or
b) make payments which are charges on its income without deduction of tax, or
c) surrender losses etc. by way of group relief
to another United Kingdom resident company where both companies are owned or controlled by a resident of the other country which is a party to the agreement. The proper comparison is not with two companies owned by a United Kingdom resident but with two companies owned by a resident of some other state. As the reliefs mentioned above would not be available in the latter circumstances, there is no discrimination under the agreement with the particular country concerned.

An election under ICTA88/S247 between a United Kingdom resident company and a non- resident company should be refused on the grounds that the validity of the election is not established to the Inspector’s satisfaction, as the residence requirement in Section 247(I) and/or Section 247(4), as appropriate, is not met. If an appeal is made against the refusal on the grounds that non-discrimination provisions in a double taxation agreement or in European Community law enable the election to be made, refer the case to International Division, External Relations Group (Advisory).