Residence of UK company with shares stapled to US corporation

The taxpayer (GEFI) a UK-resident member of the GE group filed company tax returns in which it claimed a credit for US federal income tax paid on interest income to which it was beneficially entitled as a limited partner in a Delaware limited partnership. The credit was against UK corporation tax paid on that income. HMRC refused the claim which was for about £124 913 161.

The First-tier Tribunal dismissed the GEFI’s appeal. In essence it found that although GEFI was liable to US federal tax it was not resident in the US. Further it was not carrying on a business in the US through a permanent establishment for the purposes of the treaty.

The taxpayer appealed to the Upper Tribunal. The issue was whether a UK resident company with shares ‘stapled’ to those of a US affiliate company should be treated as resident in...