FCE Bank plc v HMRC

01 Nov 2011 | Newsletter/briefing

Slaughter and May successfully represented FCE Bank plc (FCE), a subsidiary of Ford Motor Company, in relation to its appeal to the First-tier Tribunal and HMRC’s further appeal to the Upper Tribunal. The decision is an interesting example of the application of the non-discrimination provisions of double tax treaties and demonstrates the desire of the UK courts to interpret treaty provisions in a manner consistent with the decisions of courts in other jurisdictions.

Before 2000, a group relationship could not, for UK tax purposes, be traced through non-UK resident companies. HMRC therefore refused a claim for group relief by FCE from its sister company, Ford Motor Company Limited (FMCL), because both FCE and FMCL were directly-owned UK resident subsidiaries of Ford Motor Company, a US resident company.

The Upper Tribunal, agreeing with the First-tier Tribunal, held that FCE and FMCL had been subjected to "other or more burdensome taxation" than they would have been had they been owned by a common UK resident parent company, and that the sole ground for that difference in treatment was that the capital of the UK claimant company was "wholly or partly owned or controlled directly or indirectly" by a US resident parent company. Accordingly, the refusal of group relief was in breach of Article 24(5) of the US-UK double tax treaty.


Sara Luder (partner)

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