Background Note
6.Private placements are a form of unlisted debt instrument. The Breedon Report of March 2012 recommended increasing the number of UK-based private placement investors in order to unlock a new source of financing for mid-sized borrowers.
7.Where a UK company pays yearly interest on borrowings, tax rules require the company to deduct income tax from the payment. However, there are a number of exemptions from this requirement, and where the borrowing is from a non-UK lender, double taxation treaties commonly allow interest to be paid gross or at a reduced rate of withholding. This measure will remove an obstacle to the development of the UK private placement market by providing a specific exemption for private placements that meet certain qualifying conditions.
8.The power to make regulations provided in this measure allows detailed conditions to be set out in relation to private placements to qualify for the exemption from the duty to deduct income tax. These regulations will allow the exemption to be appropriately targeted.
