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HMRC internal manual

Double Taxation Relief Manual

HM Revenue & Customs
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Double Taxation Relief Manual: Guidance by country: United States of America: Agreements: Overview

The following paragraphs gives some guidance in relation to both the old and new Double Taxation Agreements between the UK and the US and the texts of both agreements.

The new UK/US Double Taxation Agreement came into force on 31 March 2003. It applies from 1st May 2003 for US withholding taxes, 1st January 2004 for other US taxes, and 1st and 6th April 2003 for UK CT and IT respectively.

As with any treaty, in interpreting and applying the treaty in a particular case, the facts of the case and the detailed wording of the treaty must be considered.

Articles broadly unchanged

The new treaty, like the old Agreement of 1975, is firmly founded on the OECD Model Tax Convention. Consequently, a number of articles remain substantially unchanged from the old Agreement and are immediately recognisable from the OECD Model (for example the permanent establishment article (Article 5) and the associated enterprises article (Article 9)).

Modernised Articles

Some articles were modernised in line with emerging OECD thinking when the treaty was negotiated. The independent personal services article in the old Agreement was deleted in accordance with the 2000 update of the OECD Model so that income derived from professional services or other services of an independent character is now dealt with as business profits under Article 7.

Other articles, whilst remaining broadly unchanged, now include additional provisions addressing issues that in the past may have led to uncertainty of treatment under the treaty.

The residence article (Article 4) now includes a tie-breaker for dual resident companies (residence to be determined by the UK and US competent authorities);

The business profits article (Article 7) includes new language governing the attribution of business profits to a permanent establishment (“the business profits to be attributed to the permanent establishment shall include only the profits derived from the assets used, risks assumed and activities performed by the permanent establishment”).

Significantly changed Articles

Some articles have changed significantly from the corresponding articles in the previous treaty. These are those dealing with:




mutual agreement; and

exchange of information.

Some articles and provisions are completely new:

the article on pension schemes;

the limitation on benefits article;

the conduit arrangement provisions (defined in the general definitions article and found in the dividend, interest, royalties, and other income articles);

a provision restricting relief where the tax treatment of the income is different in each country (in the relief from double taxation article); and

an extensive Exchange of Notes, which gives authoritative guidance on how various provisions should be interpreted.