Summary
Interest on loans arose in the UK based on a multi-factorial test, such that the payers were under an obligation (under ITA 2007, s 874) to deduct UK tax when making payments to overseas lenders.
Background
The first appellant (A), a UK incorporated and tax-resident trading company, paid interest on loans made by two trusts in Gibraltar. Each trust held shares in a company incorporated in the British Virgin Islands (BVI). Those BVI companies also made loans to A, on which interest was paid. The interest payments were funded by A from its trading activities.
Following an enquiry by HM Revenue and Customs (HMRC), income tax assessments were issued in respect of the interest payments. A appealed.
The second appellant, (P), a UK resident and domiciled individual, borrowed money from an employer financed retirement benefits scheme
