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distributions in substance. Thin capitalisation and tax planning, as with transfer pricing more generally, thin capitalisation does not require a tax avoidance motive. Other less obvious issues of possible interest are the appropriateness of the currency of the loan (e.g. These are covered in the Company Tax Manual (CTM). When a company borrows from or with the support of other group companies, funding decisions may not be driven by commercial considerations alone. While London South East do their best to maintain the high quality of the information displayed on this site, we cannot be held responsible for any loss due to incorrect information found here.

The contents of all 'Chat' messages should not be construed as advice and represent the opinions of the authors, not those of London South East Limited, or its affiliates. In the commercial world, a company is said to be thinly capitalised when it has more debt than equity, and many thin cap cases boil down to a company with more debt than it could and would have borrowed on its own resources, because. Thin capitalisation is just a form of transfer pricing, and is not limited to companies, except where the legislation says so, but this guidance concentrates largely on corporate relationships. These provisions are useful: they require no connection between borrower and lender, and are matters of substance and form rather than pricing. The debt cap applies after any transfer pricing adjustment has been made. Tiopa10/S155(6) says that the CTA10/S1000 list and the world-wide debt cap legislation shall be disregarded when calculating the transfer pricing tax advantage. CFM90100 onwards, the first two represent anti-avoidance legislation, so the choice of applicable legislation depends on the facts and circumstances of the particular case, and transfer pricing concerns may sit alongside avoidance concerns.

Sell, city, forex.3261.2838, marks and Spencer.4318.2524, post Office.2728, high St Bank.4183.2448, eURO. Factors such as group policy, strategy, and tax planning will sit alongside commercial considerations. Hmrc website, and possibly on internet search engines. Sell, city, forex.28695.23346, marks and Spencer.3863.1994.

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The connection between the parties involved might allow them to change the way in which the funding is obtained in ways unavailable or unattractive to the borrower at arms length, or to take on funding risks which an independent borrower would avoid. As a result of the differences in tax treatment between interest and dividends, a company which increases its indebtedness, and thereby increases its interest payments, reduces the tax it has to pay. Included are: interest in excess of a commercial return - previously at icta88/S209(2 d) securities that are convertible into shares - previously at icta88/S209(2 e ii) interest that is dependent on the results of the borrowers business - previously at icta88/S209(2 e iii) securities that. Hmrc, thin cap means looking at every aspect of lending and borrowing from a transfer pricing angle. However, company finance is an easy and attractive way for groups to change the jurisdiction within which profits arise, and tax planning will be an aspect of the financing plans for any major corporate acquisition. Compare Our Currency Rates, uS Dollar, buy. London South East does not authorise or approve this content, and reserves the right to remove items at its discretion.