Summary
Interest paid by a UK resident company to offshore trusts and companies was interest ‘arising in the United Kingdom’ (within ITA 2007, s 874), on which income tax was deductible. In reaching its decision, the First-tier Tribunal (FTT) declined to consider a recent case cited by HM Revenue & Customs (HMRC) involving a similar issue, during which the FTT referred to an unpublished decision of the Special Commissioner.
Background
The appellant, a UK 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 the appellant, on which interest was paid. The interest payments were funded by the appellant from its trading activities.
Following an enquiry by HMRC, income tax assessments
