Royal Bank of Canada v HMRC

In Royal Bank of Canada v HMRC [2022] UKUT 45 (TCC) (17 February 2022) the UT dismissed the company’s appeal against the FTT’s decision that its receipts of oil royalties were chargeable to corporation tax.

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 payments in respect of oil extracted from an oil field in the UK sector of the continental shelf (the Buchan field) were assigned to RBC. RBC had written off the original loan in the accounts of its banking business in Canada and treated the payments as recoveries of that loan but HMRC considered that the payments were taxable in the UK as profits of a...