The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
This guidance note provides an introduction to the provisions governing the taxation of debt for UK companies and also provides links to more detailed guidance notes dealing with those provisions.
The taxation of corporate debt in the UK is complex. There are several different sets of rules governing the amount and timing of tax deductions available for interest and other amounts relating to corporate debt. These include:
the loan relationships regime
the corporate interest restriction (CIR) rules
transfer pricing and thin capitalisation requirements
a range of associated anti-avoidance measures ― it should be noted that there are regime anti-avoidance rules (RAARs) in CTA 2009, ss 455B–455D and related sections for loan relationships and in TIOPA 2010, s 461 applicable to the CIR
It should also be remembered that payments of interest by a UK company on all liabilities capable of remaining outstanding for more than one year are subject to withholding tax, unless they are expressly exempt or qualify for relief.
In most instances, a company’s financing costs and income are taxed or relieved under the loan relationships regime. Relief is only available where the cost attaches to the company’s own loan relationships or a balance which is deemed to be a loan relationship for tax purposes.
See the What is a loan relationship? guidance note.
A loan relationship exists where a company stands in the position of debtor or creditor in respect of a money debt that arises from a transaction for the lending of money.
Although, it is often very clear that there is a loan relationship (eg bank overdrafts, term loans and corporate bonds), there are instances where it is far less obvious (eg some types of private equity finance and many inter-company balances).
In addition, certain money debts are never intended as loans and do not meet the definition of a loan relationship but frequently give rise to funding costs, FX movements, etc (eg trade debtors and creditors). Many of these balances are brought
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