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HMRC internal manual

Double Taxation Relief Manual

Double Taxation Relief Manual: Guidance by country: United States of America: Dual resident companies from 2003

The new Agreement with the USA applies from 1st May 2003 for US withholding taxes, 1st January 2004 for other US taxes, and 1st and 6th April 2003 respectively for UK CT and IT.

Under the new Article 4, the UK and US competent authorities will endeavour to determine by mutual agreement how the treaty will apply to a dual resident company. If the Competent Authorities do not reach such an agreement, the dual resident company may not claim the benefit of any relief or exemption provided for in the Agreement except those provided for in Article 24 (Relief from Double Taxation), Article 24 (non-discrimination) and Article 26 (Mutual Agreement Procedure).

As set out in DT19851A, the previous Agreement did not have a mechanism for determining the residence status of dual resident companies. The new provision will therefore mean that such companies will now have certainty about their residence status for the purposes of the treaty.

The absence of a specific test for determining the residence status of such companies allows the two competent authorities to consider all the facts and circumstances before determining whether treaty benefits should be granted.

Any cases where it is thought that, for instance, following a claim for relief it is necessary to determine the residence of such a company, the papers should be sent immediately to CTIAA, Business International.

Application of section 249 FA 1994

A UK/US dual resident company will only cease to be resident for UK tax purposes under section 249(1) FA 1994 if:

the company has made a claim under the new treaty; and

the competent authorities have awarded residence to the US.

Each case will depend on its own facts and circumstances. Whenever the competent authorities come to an agreement they will also agree the date from which residence in either the UK or the US as appropriate.