In deciding whether or not interest has a UK source, in addition to the factors described in SAIM9090, there are other matters to be taken into account for companies.
Where the debtor is a company it may of course have more than
one residence – for example it may be registered in a US
state but managed and controlled from the UK. Jurisdiction in
relation to a corporation will in general depend on where the
corporation does business (except where the EU Regulation or the
1968 Convention apply – see
SAIM9090). So for these purposes it will
be resident where it carries on business. If a debtor company has a
number of places of residence/business then to decide the location
of the debt you have to look at the terms of the loan agreement.
The loan agreement should say where the interest and loan are
payable, which (if the company is also resident in that place) will
determine whether or not the interest has a UK source.
When it comes to considering loans made to a branch of a UK company the source of the interest is overseas if all the following factors apply:
Conversely, where a branch of a non-UK resident company enters into a loan agreement in the UK for the business of its UK branch and the UK branch pays the interest then the interest is regarded as having a UK source.
Under both the EU Regulation and 1968 Convention, domicile is
the main ground of jurisdiction and will, at first sight, determine
the rules for the recoverability of debts. EU regulation 44/2001
provides for a definition of domicile for corporations so that the
company is domiciled where it has its statutory seat (in the UK its
registered office), central administration or its principal place
of business. However it is important to note that a corporation is
not domiciled in a country for these purposes merely because it
does business there. If an EU based company carries on business in
a country in which it is not domiciled you have to consider the
terms of the loan agreement to determine the situation of the debt.
For example, if a company which has its principal place of business
in the UK also carries on business in another Member state, where
the interest and loan are payable in that other Member state and
that member state’s courts have jurisdiction then the
interest will be non- UK source.
For branches of EU companies the position is as described above for branches generally.