Income Tax (Trading and Other Income) Act 2005

758 Exemption for certain interest and royalty payments

(1) No liability to income tax arises in respect of a payment of interest or a payment of a royalty if, at the time the payment is made, conditions A to D are met.

(2) Condition A is that the person making the payment is—

(a) a UK company, but not such a company’s permanent establishment in a territory other than the United Kingdom, or

(b) a UK permanent establishment of an EU company.

See section 759 as to when a permanent establishment is to be treated as the person making the payment.

(3) Condition B is that the person beneficially entitled to the income in respect of which the payment is made is an EU company, but not such a company’s UK permanent establishment or non-EU permanent establishment.

See section 760 as to when a permanent establishment is to be treated as the person beneficially entitled to the income in respect of which the payment is made.

(4) Condition C is that the company in condition A and the company in condition B are 25% associates (see section 761).

(5) Condition D is that, if the payment is a payment of interest, the Board of Inland Revenue has issued an exemption notice in accordance with regulations under section 762.

(6) This section is subject to—

• sections 763 and 764 (special relationships), and

• section 765 (anti-avoidance).