14 March 2018
Ardmore Construction v HMRC [2018] EWCA Civ 1438
This case concerned the correct application of the “source” principle, that is the principle that tax is territorial and income tax, for instance, is only payable on income from a source in the UK (see now section 368 of the Income Tax (Trading and Other Income) Act 2005 (“ITTOIA”), set out in paragraph 3 below). The principle is long-standing: see in Colquhoun v Brooks (1889) 14 App Cas 493, 504.
The issue was how the source principle is to be applied to interest paid on a foreign loan in this case. There is no universal test for applying the source principle: in this case, using the language of the day, the test has been described as “multifactorial” and thus as involving an overall assessment of the situation.
You can find a copy of the judgment here.
Richard Vallat KC appeared for HMRC.
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