Double Tax Treaties: Knights Developments v HMRC

The Upper Tribunal has held that the UK has taxing rights in relation to profits arising to an Isle of Man (IOM) company, Knights Developments Limited (KDL), from dealing in and developing UK land.

KDL argued that art.7 of the UK-IOM DTT applied to its trading profits and, in the absence of a UK permanent establishment, this meant that only the IOM had taxing rights over those profits.

However, the UT found that those profits came within art.6 as income from land, notwithstanding the widely held view that art.6 does not apply to income from the alienation of land.

The UT rejected HMRC’s alternative argument that the UK would alternatively have had taxing rights under art.13, holding that art.13 applies only to capital gains.

Hui Ling McCarthy KC acted for KDL, instructed by Joseph Hage Aaronson & Bremen LLP.

The decision can be found here.