UK And US To Sign Landmark Double Tax Treaty

by Jason Gorringe, Tax-News.com, London

24 July 2001

UK Chancellor of the Exchequer, Gordon Brown and US Treasury Secretary, Paul O' Neill are to meet today in order to unveil a new double taxation treaty between the two countries which could benefit tens of thousands of British businesses, it was announced recently.

The meeting, which is the first of a series which Mr O'Neill intends to hold with European finance ministers, represents the first shake-up of the transatlantic tax treaty for almost thirty years, and the treaty which the ministers are meeting to ratify has been in the pipeline for over three years. It is said to contain a wide range of new exemptions on investment income, pensions schemes, and capital gains, and will benefit British companies with employees based in the US, UK residents with income earned in the States, and American citizens and companies in a similar situation in the United Kingdom.

The new treaty will also explicitly exempt capital gains from double taxation for the first time. Under the previous agreement, drawn up when the amount of money flowing on an international scale was far smaller, capital gains were treated on a case by case basis. The overhauled agreement will also remove certain withholding taxes on investment income, and substantially reduce others.

A Treasury source commented on the significance of the landmark meeting: 'The economic relationship between the UK and the US is one of the most important in the world. Each is the largest investor in the other. The new tax treaty will represent a milestone in the further deepening of this strengthening economic relationship.'

Although Mr Brown and Mr O'Neill have met before, and speak regularly, today will be the first opportunity that they have had to speak in depth.

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