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HMRC internal manual

Double Taxation Relief Manual

Double Taxation Relief Manual: Guidance by country: United States of America: Exchange of information and administrative assistance: Exchanges from 2003

The UK and US competent authorities will exchange information and assist each other administratively for the purposes of carrying out the provisions of the treaty and their respective domestic tax laws.

Paragraph 1 of the exchange of information and administrative assistance article provides that the exchange of information is not restricted by Article 1(1) of the treaty. Therefore, the UK and the US competent authorities may exchange information relating to residents of third countries.

Example 1

The US competent authority will be able to ask the UK competent authority for information relating to the UK source income of a US national (who may be taxable in the US in respect of that income) even though that person may be resident in a third country.

Example 2

A company, resident in a third country, has a permanent establishment in the US which is transacting with UK taxpayers and the UK competent authority wants information about those transactions in order to determine the profits of the UK taxpayers concerned. The article permits the US competent authority to exchange information about the US permanent establishment, even though the company of which it represents a part is not a US resident.

Paragraph 2 of the article provides that if one of the competent authorities requests information, the other competent authority will obtain that information in the same manner and to the same extent as it would for its country’s own tax purposes.

This reflects the fact that the powers that exist under UK domestic tax law to call for documents relevant to liability to UK income tax, corporation tax or capital gains tax (section 20 TMA 1970) may, by virtue of section 146 of Finance Act 2000, be used in a case where the liability is to the tax of a treaty partner provided that tax is covered by the relevant treaty.

Information may only be exchanged between the US and UK competent authorities and the exchange must:

be necessary for carrying out the provisions of the treaty or of UK or US domestic tax law;

relate to the taxes covered by the treaty; and

be treated as secret.

The obligation to exchange information does not require either country to carry out administrative measures at variance with its existing practice; or to supply information that is not obtainable under domestic law; or to supply any information that would disclose any trade, business, industrial, commercial, or professional secret or trade process, or whose disclosure would be contrary to public policy.

Guidance on Exchange of Information generally is given at INTM156010 et seq. and any report should follow the form set out at INTM156060.