Hargreaves Property Holdings Ltd v HMRC

In Hargreaves Property Holdings Ltd v HMRC [2023] UKUT 120 (TCC) (26 May 2023) the Upper Tribunal (UT) dismissed the borrower’s appeal ruling that the borrower should have deducted income tax from interest payments because the interest was yearly interest had a UK source and did not benefit from the UK-to-UK withholding tax exemption or relief under the relevant double tax treaty (DTT).

The borrower a UK resident taxpayer and the parent of a group engaged in UK property investment financed its activities with loans from multiple lenders. In 2004 the loan terms were changed with the aim of the interest not being taxable in the UK so:

• each lender assigned its right to interest (including its right to the principal) to a Guernsey resident entity for consideration shortly before the interest was due - from 2012 after being assigned to the Guernsey entity the...