Discriminatory tax treatment

FCE a UK-resident company claimed group relief in respect of losses surrendered by another UK-resident company.

HMRC refused the claim on the basis that both companies’ parent company was Ford Motor Company which was resident in the USA. In all other respects the requirements for group relief were satisfied.

Had the parent company been UK-resident relief would have been allowed (TA 1988 s 413(5)).

The taxpayer claimed that the effect of the non-discrimination article 24(5) of the UK/USA double taxation agreement was that group relief was available between two UK-resident subsidiaries of a US parent company in a situation where it would be available if the parent company were UK-resident.

HMRC argued that relief had been denied not because ultimate control and ownership of the companies was in the USA but because they did not have a...