HMRC have withdrawn the concessional treatment for commercial loan arrangements, where unremitted foreign income or capital gains is used as collateral.
From 4 August 2014, money brought to or used in the UK under a loan facility secure don foreign income or gains will be taxable as a remittance of that amount of foreign income or gains. If the loan is serviced or repaid from different foreign income or gains, the repayments of capital and interest will constitute remittances in the normal way.
HMRC claim that the reason for this change is because they were seeing large numbers of arrangements which they did not consider to be ‘commercial’ and which were not within the intended scope of their guidance.
Details of any existing loans will need to be notified to HMRC by 31 December 2015 and repaid by 5 April 2016.
If you believe you may be affected by this please contact us on +44(0)20 7399 3100 to discuss.