Loan interest paid by a UK resident company had a UK source, was ‘yearly’ in nature, and was not subject to relief under the double tax treaty with Guernsey, such that the company was liable to deduct income tax from interest payments. 

The UK resident appellant company was the parent of a group engaged in property investment, development and construction. The group was founded by an individual (NA). The directors of the appellant included NA, his wife (RUA) and son, (RA) (collectively, the A family). The directors also included an individual who was unrelated to the family but was a director (JH).

All properties held by the group were in the UK and, therefore, all income and capital gains of the group were made in the UK. The appellant’s group had a continuous and growing requirement for loan funding. That funding took various forms, including trusts of which members of the A family were settlors or beneficiaries and the group