Finance Act 2015 contains an exemption from UK withholding tax on interest from “qualifying private placements”, to take effect from a date to be determined.
A “qualifying private placement” is a security that:
- is a debtor loan relationship of a company
- is not listed on a recognised stock exchange
- satisfies conditions to be set out in regulations.
The regulations that will provide much of the detail have yet to be published, but we expect conditions to relate to the issuer, the lender and the security itself, to include that:
- the issuer must be a trading company
- the minimum issue will be £10m and the maximum £300m
- the lender must be an unconnected UK-regulated financial institution or an equivalent entity authorised outside the UK, and be resident in a territory with which the UK has a double taxation treaty that includes an appropriate non-discrimination article
- the security must be “plain vanilla” debt, so be unsubordinated, have a maximum maturity of 30 years, have a normal commercial rate of interest, and not be convertible into shares.
A proposed minimum term of three years will no longer apply (as announced as part of Budget 2015).