Proposals on reform of UK taxation of interest including Eurobond exemption
Andrew Terry and Adam Dolder Withers LLP, London
On March 27, 2012, the UK Government published a consultation paper in which various changes to the UK taxation of interest payments were proposed. These changes are only intended to affect the UK income tax regime and they will not directly affect the UK tax liabilities of any companies that are either tax-resident in the UK or trading in the UK through a local permanent establishment.
However, these proposals still have important implications for the international business community because they will potentially affect the way in which UK withholding taxes are imposed in future on any outbound payments of commercial interest, whether or not companies are involved in the process (as lender, borrower or both).
The current public consultation on the proposed reforms is due to end on June 22, 2012, and it is likely that any firm proposals for reform will be announced in the Autumn of 2012 with a view to the inclusion of suitable draft legislation in the Finance Bill for 2013.
Several potentially significant changes have been proposed, with at least some of them appearing to be rather negative developments from the taxpayer’s perspective. The key proposals are as follows….