ÀÏ˾»úÎçÒ¹¸£Àû

An overseas company may make a loan to a UK company in a number of circumstances, including:

1. •

   when an acquisition is made by a subsidiary in the UK

2. •

   to fund expansion or working capital of the UK company

Possibly the key tax consideration arising in the context of cross-border financing is the extent to which interest payable by the UK company to the overseas company will be deductible. The other tax point to consider is whether the UK payer needs to withhold tax on interest payments it makes.

There are various elements of the UK tax regime that may restrict the deductibility of interest, such as transfer pricing, the corporate interest restriction and targeted anti-avoidance provisions. These are outlined below.

Note that UK permanent establishments (branches) of overseas companies are subject to the same restrictions on interest deductions as UK companies. In addition, no deduction is available in respect of interest or other finance costs paid by the permanent establishment to its head office.

Interest will only be deductible where the head office has made