Loans

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FORTHCOMING CHANGE: The government is exploring options to potentially simplify the process and administration of double tax treaty (DTT) relief from UK withholding tax on payments of UK source yearly interest to non-UK lenders. For more information on the consultation published on 13 July 2026, see News Analysis: Legislation Day: Draft Finance Bill 2027—Tax analysis—Finance.

A company's loan capital is, broadly, money that it has borrowed. It represents the company's debt.

What is debt?

Loan capital (debt) can, broadly, be compared and contrasted with share capital (equity). The distinction between debt and equity is critical but not always obvious. Some of the key features of debt are:

  1. •

    creditors (lenders) rank ahead of shareholders during an insolvency procedure (ie a lender will need to be repaid before a shareholder)

  2. •

    debt normally attracts some form of regular return (eg interest) whereas shares will entitle holders to dividends but only if the company has sufficient distributable reserves to fund them and the board approves them

  3. •

    unlike equity, the value of a company's debt will not (normally) be linked to the performance of the company

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