Restricted relief

BUKP and BUK were UK-resident companies which were wholly owned by a US company BDE. BUK made a profit while BUKP made a loss of the same amount.

There was no commercial purpose for this other than to produce a matching loss and profit. BUK’s profit was taxed in the US under the ‘check the box regulations’ under which the profit was deemed to be BDE’s profit if no election was made for BUK to be taxed separately.

BUK then claimed double tax relief in respect of that tax and claimed that its liability to UK tax was thereby extinguished.

HMRC refused the claim so the company appealed to the Special Commissioners. They dismissed the company’s appeal saying unilateral relief under TA 1988 s 790 was not available to...