Deduction of tax: qualifying private placements: the regulations: creditor certificates
The regulations: creditor certificates
Regulation 5 explains what is meant by a ‘creditor certificate’. It notes the certificate must be provided by or on behalf of the creditor. For example, the certificate may be provided by a general partner on behalf of partners who are qualifying creditors. There is no prescribed form for the creditor certificate.
A creditor must meet and certify the following conditions.
The creditor must be resident in a ‘qualifying territory’, as defined in TIOPA10/S173. A qualifying territory is explained at INTM652020 and broadly means any territory with which the UK has a double taxation treaty that contains a non-discrimination article. There is no requirement for the treaty to reduce withholding tax on interest to nil. The list of qualifying territories is at INTM412090.
‘Resident’ for these purposes takes its meaning from TIOPA10/S167(5) and means being liable to tax in a territory by reason of domicile, residence or place of management. ‘Liable to tax’ in this context means being within the scope to tax. Therefore, a creditor that is a pension fund, charity or similar organisation in a qualifying territory can benefit from the qualifying private placement exemption, even if their income is exempt from tax. This is explained at INTM162040.
The creditor must be beneficially entitled to the interest on the relevant security for genuine commercial purposes and not as part of a tax advantage scheme. See SAIM9350 for more on meaning of these terms.