Income Tax Act 2007 section 879

Interest paid on advances from banks

Section 879 provides an exemption from the obligation to deduct income tax at source when paying interest on advances from banks, where the recipient is subject to corporation tax or is an eligible bank or international organisation.

• No income tax deduction is required on interest paid on a bank advance where the person beneficially entitled to the interest is within the charge to corporation tax, or is a bank that would be so chargeable but for the foreign permanent establishment exemption.
• The definition of "bank" for these purposes is as set out in section 991 of the Act.
• Interest paid on advances from the European Investment Bank is automatically exempt from the deduction requirement, regardless of whether the recipient is within the charge to UK corporation tax.
• An order designating an international organisation as a bank under section 991(2)(e) may also grant that organisation the same unconditional exemption from deduction that applies to the European Investment Bank.