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HMRC internal manual

International Manual

HM Revenue & Customs
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Thin capitalisation: practical guidance: creating agreements between HMRC and the group: making a recommendation to the Double Taxation Treaty team on pre-ATCA cases

These instructions relate to thin cap cases where treaty clearance applications were received on or by 21st March 2007, and to the few (if any) instances where companies have opted to follow the “old route” of combining treaty clearance with thin cap after March 2007.

The link has been broken between treaty clearance and thin capitalisation for clearance applications received by the treaty team after 21st March 2007.

It remains the case that only the Double Taxation Treaty Team at LBS Nottingham can confirm the availability of treaty benefits in relation to payment of interest overseas. They consider applications and are responsible for granting treaty clearance to pay interest gross or at the appropriate reduced treaty rate. However, for earlier period applications (or where the applicant has opted to retain the earlier process) the team acts upon the recommendation of the corporation tax office of the borrower, which will have reviewed the thin capitalisation position and either decided there is nothing to worry about or concluded a forward agreement with the paying company. This page deals with the process where a thin cap case has been negotiated to settlement and a recommendation for treaty clearance needs to go to the DT Treaty Team.

The recommendation should include the following:

  • a copy of the completed form 4450/1 (the form sent by LBS Nottingham providing details of the application and requiring completion by the CT caseworker).
  • a copy of the agreement concluded between HMRC and the UK group.
  • if necessary, a copy of any correspondence that informs interpretation of the agreement (though as far as possible the agreement should be self-contained)
  • a clear instruction to LBS Nottingham on how the clearance should be worded, though it should be sufficient to state that the clearance is in accordance with the thin cap agreement, noting the date and the parties.
  • any other instructions required to bring the case to a close.
  • contact information in the event of a query.

For example:

Your case: FD13/E/54432 US Group Inc
My case: 275/11234 56788 UK Group plc

Please find attached a copy of:

  • a completed form 4450/1.
  • a copy of the thin capitalisation agreement concluded between this office and the UK group.
  • a copy of the correspondence between this office and the UK group between the dates of 15 July 20X1 and 13 March 20X2

I recommend that treaty clearance be given subject to the terms of the thin capitalisation agreement as informed by the attached correspondence.

Please ensure that a copy of the clearance is sent to this office.

In the event of any query, please initially contact the DT Treaty Team at LBS Nottingham (formerly at Charity, Assets & Residence).