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Introduction

This guidance note outlines the UK tax considerations that arise when a foreign company makes a loan to a UK company.

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

One of the key tax considerations 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. 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.

It should also be noted that UK withholding tax may arise on interest which is paid by a UK company to a company in another country, whereas payments of interest between UK companies is not subject to withholding tax.

See the Withholding tax and Withholding tax on payments of interest guidance