When a request is made for relief (either an application for
relief at source or a claim to repayment of tax withheld) from
United Kingdom tax on interest paid abroad (see DT215), FICO
(International) is responsible for checking whether the applicant
is entitled to relief as a resident of the other country. However
the District or International Division 4/5, Melbourne House is
responsible for other aspects and deciding how the interest
payments should be treated in the payer's computations. The
flowchart in Technical Memo TS143/97 shows how this responsibility
is shared. In order to help with the process FICO (International)
will issue either a form 4450/I(Application)FD or a
4450/I(Claim)FD, giving some basic details of the loan to be
considered.
Form 4450/I(Claim)FD is used where a repayment of
withholding tax deducted for 1996/97 or later years is being
claimed. Such a claim is within the Income Tax Self Assessment
(ITSA) provisions, even if the claimant is a non-resident company,
because the tax deducted is Income Tax. You should follow the usual
ITSA procedures with respect to enquires : FICO (International)
will be the caseholder and open the enquiry. You should make sure
that they are notified as soon as it seems likely that enquiries
are needed. They will co-ordinate proceedings and give you further
guidance if required.
Form 4450/I(Application)FD is used when exemption from tax
at source has been requested, either for past periods or going
forward. This application does not constitute a claim within the
ITSA provisions.
Both claims and applications should be examined critically
and this will involve consideration of more than just the terms of
the loan agreement. It should be used as the occasion to look at
the status of payments under domestic law, principally ICTA88/S209,
and the loan relationship rules, as well as under the relevant
double taxation agreement. Remember that the new loan relationship
rules do not change the application of ICTA88/S349 or ICTA88/S209,
and that debits which could be treated as a distribution on payment
are excluded from the regime (FA96/SCH9/PARA1).
The first two sections of each form are factual. Full and
accurate answers are important. If you do not have the information,
ask the agent or the United Kingdom payer. Do not wait for the
borrower's accounts covering the period in which the loan first
appears.
The final section of each form addresses issues on which you
or International Division will have to exercise judgement. If there
are areas of uncertainty, either consult International Division
4/5, Melbourne House by telephone or pass the completed form to
them, highlighting the area of doubt.
You will need the loan agreement to deal with the questions.
If there is no written agreement, the terms will have been agreed
orally, and your replies should be based on these.
