CFM92880 - Debt cap: income from EEA group companies: payer is liable to tax

This guidance applies to worldwide group periods of account ending before or straddling 1 April 2017.

Meaning of ‘tax of a territory outside the UK’

Where the payer is tax-resident in an EEA territory, they must be liable to a tax of that territory that is chargeable by reference to profits, income or gains arising to the payer. If the payer is not liable to tax in the EEA territory when the payment is received, Chapter 5 does not operate to exempt the corresponding financing income of the recipient.

TIOPA10/S304(2) defines what references to tax of a territory outside the UK mean. Such references are to:

  • taxes charged on income, corresponding to UK income tax
  • taxes charged on income, chargeable gains, or both, corresponding to UK corporation tax.

TIOPA10/S304(3) also includes within the definition of tax of a territory outside the UK, taxes that are charged by provinces, states, municipalities and other parts of countries or local bodies in EEA countries. If the taxes charged by such bodies are charged by reference to income and correspond to income tax, or are charged on income or chargeable gains and correspond to corporation tax, then these will be included within the meaning of tax of a territory outside the UK.