Meaning of “established”

The taxpayer was a UK resident received a pension from the World Bank’s staff retirement plan (SRP) which was managed in Washington DC with the international finance organisation as trustee.

The taxpayer claimed partial exemption from UK income tax on his pension on the basis of 17(1)(b) of the UK/US double tax agreement (DTA) because the SRP was established in the United States.

HMRC refused the claim saying “established” meant “established under and in conformity with the relevant contracting state’s tax legislation”. The plan was exempt from US tax by concession from the Internal Revenue Service as a result of the privileges and immunities enjoyed by the World Bank.

The matter found its way to the Upper Tribunal which noted that a treaty must be interpreted in accordance with the “ordinary meaning” of its terms under the Vienna Convention. The DTA...