“741 Exemption from sections 739 and 740 Sections 739 and 740 shall not apply if the individual shows in writing or 35 otherwise to the satisfaction of the Board either— (a) that the purpose of avoiding liability to taxation was not the purpose or one of the purposes for which the transfer or associated operations or any of them were effected; or (b) that the transfer and any associated operations were bona fide 40 commercial transactions and were not designed for the purpose of avoiding liability to taxation. 5 The jurisdiction of the Special Commissioners on any appeal shall include jurisdiction to review any relevant decision taken by the Board in exercise of their functions under this section.”
“739 Exemption: all relevant transactions pre-5 December 2005 transactions (1) This section applies if all the relevant transactions are pre-5 December 2005 transactions. 5 (2) An individual is not liable for income tax under this Chapter for the tax year by reference to the relevant transactions if the individual satisfies an officer of Revenue and Customs that condition A or B is met. 10 (3) Condition A is that the purpose of avoiding liability to taxation was not the purpose, or one of the purposes, for which the relevant transactions or any of them were effected. (4) Condition B is that the transfer and any associated operations– 15 (a) were genuine commercial transactions, and (b) were not designed for the purpose of avoiding liability to taxation.”
“ARTICLE 7 Business profits (1) The profits of an enterprise of a Contracting State shall be taxable only 10 in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State, but only so much of them as is attributable to that permanent establishment. 15 (2) Subject to the provisions of paragraph (3) of this Article, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate 20 enterprise engaged in the same or similar activities under the same or similar conditions and dealing at arm's length with the enterprise of which it is a permanent establishment. (3) In determining the profits of a permanent establishment, there shall be allowed as deductions all expenses of the enterprise which are incurred for 25 the purposes of the permanent establishment, including executive and general administrative expenses so incurred, whether in the Contracting State in which the permanent establishment is situated or elsewhere. However, no such deduction shall be allowed in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the 30 permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission for specific services performed or for management, or, except in the case of a banking enterprise, by way of interest on moneys lent to the permanent 35 establishment. Likewise no account shall be taken, in determining the profits of a permanent establishment, of amounts charged (otherwise than towards reimbursement of actual expenses), by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of 40 patents or other rights, or by way of commission for specific services 15 performed or for management, or, except in the case of a banking enterprise, by way of interest on moneys lent to the head office of the enterprise or any of its other offices. (4) Insofar as it has been customary in a Contracting State to determine the profits to be attributed to a permanent establishment on the basis of an 5 apportionment of the total profits of the enterprise to its various parts, nothing in paragraph (2) of this Article shall preclude that Contracting State from determining the profits to be taxed by such an apportionment as may be customary; the method of apportionment adopted shall, however, be such that the result shall be in accordance with the principles contained in 10 this Article. (5) No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise. (6) For the purposes of the preceding paragraphs of this Article, the profits 15 to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary. (7) Where profits include items which are dealt with separately in other Articles of this Convention, then the provisions of those Articles shall not 20 be affected by the provisions of this Article.”
“The purpose of paragraph 1 is to provide limits to the right of one Contracting State to tax the business profits of enterprises that are residents of the other Contracting State. The paragraph does not limit the right of a Contracting State to tax its own residents under controlled foreign 40 16 companies provisions found in its domestic law even though such tax imposed on these residents may be computed by reference to the part of the profits of an enterprise that is resident of the other Contracting State that is attributable to these residents’ participation in that enterprise. Tax so levied by a State on its own residents does not reduce the profits of the enterprise 5 of the other State and may not, therefore, be said to have been levied on such profits … .”
“17. These words, however, make it clear that the primary purposes of the 20 Treaty are, on the one hand, to eliminate double taxation and, on the other hand, to prevent the avoidance of taxation. In seeking a purposive interpretation, both these principles have to be borne in mind. Moreover, the latter principle, in my judgment, means that the Treaty should be interpreted to avoid the grant of double relief as well as to confer relief 25 against double taxation.”
“33. Of prime significance is the fact of the residence of individuals and partnerships exercising a trade or profession: residence is the connecting 30 factor which entitles a state to impose income tax. The correlative proposition is that the resident of a state, who enjoys the benefits provided by it to its residents, has a reasonable expectation of being taxed by the state in question on the income of a trade or profession. 35 34. Secondly, [double taxation agreements (“DTAs”)] respect the principle of taxation by the state of residence. They aim to avoid the taxation of residents twice over on the same income. What DTAs do not aim to do is to facilitate the avoidance of tax, or its reduction below the level of tax ordinarily paid by residents. In those circumstances it is a legitimate aim of 40 the public policy of the state in fiscal matters to ensure that DTAs relieve double taxation of residents rather than serve as an instrument used by 17 taxpayers who choose to participate in artificial arrangements to avoid or reduce their level of taxation.”
“(3) Subject to the provisions of this Part, the arrangements shall, notwithstanding anything in any enactment, have effect in relation to income tax and corporation tax in so far as they provide— (a) for relief from income tax, or from corporation tax in respect of 10 income or chargeable gains; or (b) for charging the income arising from sources, or chargeable gains accruing on the disposal of assets, in the United Kingdom to persons not resident in the United Kingdom; or (c) for determining the income or chargeable gains to be attributed— 15 (i) to persons not resident in the United Kingdom and their agencies, branches or establishments in the United Kingdom; or (ii) to persons resident in the United Kingdom who have special relationships with persons not so resident; or 20 (d) for conferring on persons not resident in the United Kingdom the right to a tax credit under section 231 in respect of qualifying distributions made to them by companies which are so resident.”
“interest arising in one of the States which is derived and beneficially owned by a resident of the other State shall be taxable only in that State”
“In my judgment these cases show that the question turns on the nature of the statutory process. Interest from exempt securities does not cease to be 30 such by being included as a component element of the recipient's taxable profits: Hughes. Exempt income does not change its character or lose its exemption merely because it is deemed to be the income of another person or is imputed to him: Strathalmond. But where tax is charged on a conventional or notional sum which exists only as the product of a 35 calculation, the fact that one of the elements in the calculation is measured by reference to the amount of exempted income does not make the exempted income the subject of the tax: Australian Mutual Provident Society.”