Yates v. GCA International Ltd., [1991] BTC 107 (Ch. D.)

In accepting a finding of the Commissioners that the income earned by a U.K. petroleum consulting firm from work done pursuant to a contract with a Venezuelan company for the "rehabilitation investigation" of three Venezuelan oil fields arose partly in the U.K. and partly in Venezuela, Scott J. stated (p. 123):

"What conceptually or from a linguistic point of view is the matter with regarding remuneration from a contract with an international complexion as producing income which ... can be regarded as arising partly in one country and partly in another?"

The U.K. taxpayer was entitled under a contract with a Venezuelan company to £97,345 for its work in carrying out a comprehensive field rehabilitation investigation of three Venezuelan oil fields. Article 54 of the Venezuelan Tax Code deemed the net profits of non-residents originating from non-commercial professional activities to be 90% of the gross receipts (or £87,610 in this case), as a result of which the taxpayer was subject to a Venezuelan tax of approximately £22,353.

The Crown unsuccessfully argued that the Venezuelan tax was not eligible for a foreign tax credit under the Taxes Act (U.K.) by virtue of subsection 498(6) thereof, which provided that the tax credit was only available for taxes which "are charged on income and correspond to income tax or corporation tax in the United Kingdom". Scott J. stated (p. 119):

"It is not self-evident that in the majority of cases to which art. 54 might apply the ten per cent deduction would be a gross underestimate of the level of expenses that would have had to be incurred in order to have earned the gross receipts in question."