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Ardmore – Court of Appeal decision

Ardmore – Court of Appeal decision

The Ardmore case concerned whether interest arose in the UK such that there was an obligation to withhold tax.


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The Court of Appeal has found for HMRC in a case regarding whether a source of interest arose within the UK and a company was obliged to withhold income tax on payments of interest. The interest was paid by Ardmore, a company resident in the UK, on unsecured loans from a non UK resident lender that were governed by non-UK law. The Court of Appeal confirmed that the test of the source of an interest payment is not merely multifactorial but also practical and acutely fact-sensitive; the court or tribunal must examine all the available facts both singly and cumulatively.

The following factors were significant in arriving at the decision.

  • The Court of Appeal distinguished between the source of the interest and the source of the loan; the funds paid over as interest derived from funds generated by the Ardmore business in the UK. By way of contrast, the activity of lending became passive once the loan was made;
  • When considering the relevance of certain clauses in the loan agreement, the Court noted that there was no default and the Gibraltarian exclusive jurisdiction and governing law clauses would only matter if there was default. Furthermore, the enforcement of any judgment following a default would be in the UK; and
  • The links with the lending jurisdiction (Gibraltar) were insubstantial as compared to the links to the UK; there was no evidence that they were backed up by any kind of other activity within Gibraltar, nor was the commercial purpose of the form of the activities explained.

For further information please contact:

Rob Norris

Paul Harden

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