After 1 April 2001, where a UK company makes a payment of yearly
interest to the UK permanent establishment of an overseas company,
the payment may be made gross if the payer reasonably believes that
the permanent establishment will treat the income as part of the
profits of the UK permanent establishment, ICTA88/S349A and
S349B(2).
Prior to 1 April 2001, it had been accepted, as a matter of
practice, that where a non-resident company traded in the UK
through a permanent establishment and the profits of that permanent
establishment were liable to corporation tax under ICTA88/S11 (and
were not exempted under a treaty), the presence in the UK
constituted a 'usual place of abode'. Consequently, it was accepted
that tax need not be deducted from payments of interest made to the
UK permanent establishment of such a company.
