Refinancing of a corporate group owning UK property

Question

A Luxembourg resident company (LuxCo) owns a number of subsidiaries incorporated and tax resident in Jersey (the ‘Jersey SPVs’). Each Jersey SPV owns rented UK commercial property held as an investment. LuxCo also owns a subsidiary incorporated and tax resident in the UK (‘UK Sub’) holding rented UK commercial property as an investment. The corporate group is currently financed by way of a five year loan made to LuxCo by a third party UK resident company. LuxCo has lent on monies under unsecured intra-group loans to each of its subsidiaries. The intra-group loans are governed by Luxembourg law and enforceable in Luxembourg. Interest payable by UK Sub to LuxCo under the intra-group loan is paid gross following a claim for relief from UK withholding tax (UK WHT) under Article XI of the UK-Luxembourg Double Tax Treaty. It is proposed that 50% of the existing loan to...