UBS AG v Her Majesty's Revenue & Customs

Facts

UBS AG, a Swiss bank, appealed as successor to Swiss Bank Corporation in respect of SBC's London branch. SBC was resident in Switzerland and carried on a banking business in London through that branch, which acted as a market maker on the London Stock Exchange, holding itself out as willing to buy and sell securities at prices it specified. The branch had accumulated substantial trading losses — £215,900,346, £515,978,719 and £595,220,041 as at 1 January 1993, 1995 and 1996 respectively. In the course of its market making it received dividends from UK resident companies and received and paid manufactured dividends, the surplus of dividends and manufactured dividends received over manufactured dividends paid amounting to £233,282,021 for the calendar years 1993, 1995 and 1996. Had the branch been UK resident, those distributions would have carried tax credits of £58,320,506 under section 231 of the Taxes Act 1988. On 24 December 1999 the branch claimed relief under section 788(3)(a) of the Taxes Act 1988 for the period ended 31 December 1993, with similar claims for 1995 and 1996 made on 22 February 2000, relying on the non-discrimination article of the UK-Switzerland Double Taxation Convention of 8 December 1977 to obtain relief under section 243 of the Taxes Act 1988. The Revenue refused the claim by letter of 27 February 2003 and the branch appealed.