FCE Bank: Treaty Non-Discrimination Articles

The Upper Tribunal has held that the nondiscrimination article in the UK/US double tax treaty overrode the UK domestic provisions in question (the pre-2000 group relief rules) as these were capable of operating in a cross-border context without the restrictions on the nationality of the parent company which these provisions then contained.

Pre-2000 UK group relief provisions discriminated on the grounds of nationality

In this case, FCE Bank wished to claim loss relief from its sister company, FMCL. However, although both companies were UK resident and all other requirements for the surrender of group relief were met, the companies' common 75 per cent parent was US resident and, pre-2000, the UK group relief legislation did not allow companies to trace their ownership through non-UK resident companies for the purposes of establishing a qualifying group relationship.