SAIM9360 - Deduction of tax: qualifying private placements: the regulations: the creditor

The regulations: the creditor

Regulation 2 defines the creditor as the person who is beneficially entitled to the interest on the qualifying private placement. A payment may be passed through one or more intermediaries before receipt by the creditor who ultimately has the beneficial entitlement to the interest. The relevant debtor must hold a creditor certificate in respect of the person who is beneficially entitled to the interest.

HMRC’s International Manual at INTM332000 onwards and at INTM504020-504040 discusses the meaning of ‘beneficial ownership’. In the case of Indofood International Finance Limited v JPMorgan Chase Bank NA London Branch [2006] EWCA Civ 158, the Court of Appeal identified two possible approaches to determining the meaning of beneficial ownership, described by the court as an ‘international fiscal meaning’ and a ‘narrow technical domestic law meaning’. INTM332050 notes that in practice there are unlikely to be many instances in which these two approaches are at variance with each other. Such instances are likely to be restricted to cases of ‘treaty shopping’. Arrangements where some or all of the interest is paid to the ultimate benefit of a lender in a non-qualifying territory (see SAIM9370) are unlikely to pass the tax advantage scheme test. In such cases, the debtor will not hold a valid creditor certificate.

Tax transparent entities will be ‘looked through’ to find the beneficial owner of the interest. For example, the partners in a partnership are likely to be the beneficial owners of the interest.