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Royal Bank of Canada v HMRC

This is an important decision of the Supreme Court on the correct approach to interpreting double taxation treaties. The key point of contention is whether a broad or narrow approach is to be preferred.

The bank here had taken over the rights to receive payments from a Canadian company whose UK subsidiary held an oil exploration licence. The Court had to determine whether those payments were in respect of the right to work the field. If they were then the UK had taxing rights.

The FTT and UT had held that they were indeed in respect of that right, but the Court of Appeal and now the Supreme Court have held that they were not.

The Supreme Court drew a distinction between someone having a right to work natural resources and someone having a right to require another person to work those natural resources. The taxpayer here had the latter but not the former. Thus the UK did not have the taxing rights and the taxpayer’s