Royal Bank of Canada v HMRC

In Royal Bank of Canada v HMRC [2020] UKFTT 257 (TC) (23 June 2020) the First-tier Tribunal (FTT) dismissed the Royal Bank of Canada’s appeal against discovery assessments charging its receipt of oil royalties to corporation tax. Assigned oil royalties are taxed under UK ring-fence rules and the taxpayer was careless not to include them on returns to HMRC.

The Royal Bank of Canada (RBC) had lent money (from its Canadian operations not from its UK permanent establishment) to an oil exploration company to fund exploration in the UK continental shelf. Following the sale of the oil exploration business and the insolvency of the borrower the rights of the borrower to receive oil royalties were assigned to RBC. RBC had treated them as income of its banking business in Canada. HMRC argued that it should have treated the income as part of a ring-fence activity carried on...