Taxation (International and Other Provisions) Act 2010 section 108

Disregard of foreign tax attributable to interest under a loan relationship

Section 108 requires foreign tax related to a loan relationship to be ignored when calculating double taxation relief, if the tax relates to a period when the company was not a party to that loan relationship.

• When applying the double taxation relief rules for corporation tax, certain foreign taxes must be disregarded.
• The foreign tax to be disregarded is tax charged by an overseas territory that is attributable, on a just and reasonable basis, to interest accruing under a loan relationship during a period when the company was not a party to that relationship.
• This prevents a company from claiming double taxation relief for foreign tax on loan interest where the company had no involvement in the loan at the time the interest accrued.
• However, this disregard does not apply if the foreign tax falls within certain exceptions for sale and repurchase arrangements (section 109) or stock lending arrangements (section 110).