Direct Tax Acts, Finance Act 2018

198 Certain interest not to be chargeable
FA95 s40; FA98 s54; FA99 s85; FA00 s34; FA01 s36; FA03 s48(3); FA04 s89 and Sch3; FA07 s35 and Sch2; F(No. 2)A08 s25 & s33(d); FA10 s40; FA12 s39(1); FA12 s54 and Sch 1(8); FA13 s105 and Sch 2(1)(d)

[(1) (a) In this subsection –

[“arrangements” means arrangements having the force of law by virtue of section 826(1) or arrangements made with the government of a territory which on completion of the procedures set out in section 826(1) will have the force of law;]2

relevant territory” means –

(i) a Member State of the European Communities other than the State, […]3 [or]4

(ii) not being such a Member State, a territory with the government of which arrangements [have been [made;]6]5

[…]7

“tax”, in relation to a relevant territory, means any tax imposed in that territory which corresponds to [income tax or corporation tax, as is appropriate,]8 in the State.

(b) For the purposes of this subsection, a [person]9 shall be regarded as being a resident of a relevant territory if –

(i) in a case where the relevant territory is a territory with the government of which arrangements have been made [and have effect in accordance with the provisions of those arrangements]10, the [person]11 is regarded as being a resident of that territory under those arrangements, and

(ii) in any other case, the [person]12 is by virtue of the law of the relevant territory resident for the purposes of tax in that territory.

(c) Notwithstanding any other provision of the Income Tax Acts but without prejudice to any charge under the Corporation Tax Acts on the profits of such a person –

(i) a company not resident in the State or a person not ordinarily resident in the State shall not be chargeable to income tax in respect of interest paid by –

(I) a company in the course of carrying on relevant trading operations (within the meaning of section 445 or 446), or

(II) a specified collective investment undertaking (within the meaning of section 734),[…]13

[(ii) a company shall not be chargeable to income tax in respect of interest paid by a relevant person (within the meaning of section 246) in the ordinary course of a trade or business carried on by that person—

(I) if the company is not resident in the State but is regarded for the purposes of this subsection as being a resident of a relevant territory which imposes a tax that generally applies to interest receivable in that territory by companies from sources outside that territory, or

(II) where the interest—

(A) is exempted from the charge to income tax under arrangements made with the government of a territory outside the State having the force of law under the procedures set out in section 826(1), or

(B) would be exempted from the charge to income tax if arrangements made, on or before the date of payment of the interest, with the government of a territory outside the State, that do not have the force of law under the procedures set out in section 826(1), had the force of law when the interest was paid,]14]1

[(iii) a person shall not be chargeable to income tax in respect of interest paid by a company—

(I) if the person is not a resident of the State and is regarded as being a resident of a relevant territory for the purposes of this subsection, or

(II) [if]16 the person is a company controlled in accordance with section 172D(3)(b)(ii), or a company the principal class of shares of which are shares to which section 172D(3)(b)(iii) applies,

and the interest is interest to which section 64(2) applies, an interest payment to which section 246A applies or interest paid in respect of an asset covered security within the meaning of section 3 of the Asset Covered Securities Act 2001,]15

[(iv) a person shall not be chargeable to income tax in respect of interest paid by a qualifying company (within the meaning of section 110) if the person is not a resident of the State and is regarded as being a resident of a relevant territory for the purposes of this subsection, and the interest is paid out of the [assets of the qualifying company, and]18.]17

[(v) a person shall not be chargeable to income tax in respect of discounts arising on securities issued by a relevant person (within the meaning of section 246) in the ordinary course of a trade or business carried on by that person if the first mentioned person is not a resident of the State and is regarded as being a resident of a relevant territory for the purposes of this subsection.]19

[(2) Where a company would not be chargeable to income tax in respect of interest paid in respect of a “relevant security” (within the meaning of section 246) in accordance with this section but for the fact that—

(a) sections 445 and 446 have been deleted, and

(b) those sections referred to time limits in respect of certificates to which each section related,

then, notwithstanding those deletions and time limits, the company shall not be so chargeable and the other provisions of this section shall apply with any modifications necessary to give effect to this subsection.]20

Go to Revenue Guidance Notes on TCA

Amendments

1 Substituted by FA00 s34 and applying as respects interest paid in the year of assessment 2000 – 01 and subsequent years of assessment

2 Substituted by FA10 s40(1)(a) and applying to interest paid on or after the date of the passing of FA10 (3 April 2010), other than interest paid under an agreement entered into before that date

3 Deleted by F(No. 2)A08 s33(d)(i) and deemed to have come into force and takes effect as on and from 1 January 2009

4 Inserted by FA10 s40(1)(b)(i) and applying to interest paid on or after the date of the passing of FA10 (3 April 2010), other than interest paid under an agreement entered into before that date

5 Substituted by F(No. 2)A08 s33(d)(i) and deemed to have come into force and takes effect as on and from 1 January 2009

6 Substituted by FA10 s40(1)(b)(ii) and applying to interest paid on or after the date of the passing of FA10 (3 April 2010), other than interest paid under an agreement entered into before that date

7 Deleted by FA10 s40(1)(b)(iii) and applying to interest paid on or after the date of the passing of FA10 (3 April 2010), other than interest paid under an agreement entered into before that date

8,9,11,12 Substituted by FA01 s36 as respects interest paid on or after 30 March 2001

10 Inserted by FA10 s40(1)(c) and applying to interest paid on or after the date of the passing of FA10 (3 April 2010), other than interest paid under an agreement entered into before that date

13 Deleted by FA01 s36 as respects interest paid on or after 30 March 2001

14 Substituted by FA10 s40(1)(d) and applying to interest paid on or after the date of the passing of FA10 (3 April 2010), other than interest paid under an agreement entered into before that date

15 Substituted by FA12 s39(1) and applying to interest paid on or after the passing of Finance Act 2012 – 31 March 2012

16 Inserted by FA13 s105 and Sch 2(1)(d) and having effect on and from the passing of Finance Act 2013 – 27 March 2013

17 Inserted by FA03 s48(3) and applying as respects interest paid on or after 6 February 2003

18 Substituted by F(No. 2)A08 s25(1)(b) and applying as respects interest paid or discounts arising on or after 1 January 2009

19 Inserted by F(No. 2)A08 s25(1) and applying as respects interest paid or discounts arising on or after 1 January 2009

20 Substituted by FA12 s54 and Sch 1(8) and is deemed to have come into force and takes effect on and from 1 January 2012

Sections referred to in text

section 64 [Interest on quoted Eurobonds]

section 110 [Securitisation of assets]

section 172D [Exemptions from dividend withholding tax for certain non-resident persons]

section 246 [Interest payments by companies and to non-residents]

section 246A [Interest in respect of wholesale debt instruments]

section 445 [Certain trading operations carried on in Shannon Airport]

section 446 [Certain trading operations carried on in Custom House Docks Area]

section 734 [Taxation of collective investment undertakings]

section 826 [Agreements for relief from double taxation]

Cross references

817C Restriction on deductibility of certain interest

Revenue Guidance

Interest payments to Hong Kong – eBrief No. 166/18