Taxation (International and Other Provisions) Act 2010 section 438

Exemption for interest payable to third parties etc.

Section 438 provides an exemption from the corporate interest restriction rules for interest and similar financing costs paid by qualifying infrastructure companies to third-party (non-related) creditors, subject to certain conditions about the nature of the creditor and the limited recourse nature of the lending.

• Interest expense of a qualifying infrastructure company can be treated as exempt (and therefore excluded from the interest restriction calculations) if certain conditions about the creditor and recourse are met throughout the period.
• The creditor must either be unrelated to the company or itself be a qualifying infrastructure company, and the creditor's recourse in the event of default must be limited to the income, assets, shares or debt of qualifying infrastructure companies.
• Guarantees or financial assistance from third parties, relevant public bodies, or those provided before 1 April 2017 are disregarded when assessing whether the recourse condition is met; a further grandfathering rule applies for guarantees provided before 29 October 2018 in relation to companies not previously UK resident.
• Non-financial guarantees relating to the performance of goods or services contracts are also disregarded, provided the guarantor's liability does not exceed the contract consideration.