US And UK Tweak Double Tax Agreement

by Jason Gorringe, Tax-News.com, London

19 October 2006

HM Revenue and Customs and the United States Internal Revenue Service earlier this month signed an agreement as competent authorities under the 2001 UK-US double taxation convention.

Both the UK and US rules deny relief for losses which have been relieved in another territory. Both countries also deny relief which could have been claimed in an overseas territory but was denied in that territory under a dual consolidated loss rule.

The interaction of the UK and US rules for loss relief mean that it is possible that the loss of a UK permanent establishment cannot be offset either against the taxable income of a US affiliate under the US Code or against the profits of a UK affiliate under the UK rules for group relief.

Subject to conditions set out in the agreement, the competent authorities have agreed that the relevant taxpayer can make an election to seek relief under one or other of the relevant relief provisions, notwithstanding the existence of the elected countries mirror rule.

The double taxation convention between the UK and the US was signed on 24 July 2001 and entered into force on 31 March 2003.

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