INTM413236 | Transfer pricing: the main thin capitalisation legislation: payments of yearly interest overseas: Giving effect to a claim by a payer

Where HMRC is satisfied that the claimant is entitled to treaty relief, relief will be given by discharging the appropriate amount of unpaid income tax or, where the relevant tax has already been paid, by making the appropriate repayment.

Late Payment Interest

Where the payer successfully claims treaty relief, HMRC will resolve the matter by collecting any accrued late payment interest. Tax will only be assessed to the extent it has not been relieved by the treaty relief.

Late payment interest will be charged for the period of failure, calculated from the date on which the payment of tax was due to HMRC until the earlier of:

• the date on which a valid claim is submitted, at which point the liability is provisionally considered to be discharged; or

• the date on which payment of the tax is made.

Interaction of Claims and Enquiries

HMRC may decide to process and give effect to the claim prior to deciding whether to open an enquiry into that claim. Giving effect to a claim in this way does not prevent HMRC from subsequently enquiring into it within the applicable enquiry period (sometimes referred to as ‘process now – check later’).

Claims are subject to HMRC’s enquiry powers under Schedule 1A to TMA 1970. HMRC may enquire into any matter relevant to the claimant’s entitlement to relief or the amount of relief due. This may include the lender’s residence and beneficial ownership, whether other treaty conditions are met, and whether any tax was deducted or paid.

Claimants must provide such information and documentation that is reasonably required in order to determine the claim. Failure to provide requested information may result in an officer of HMRC determining the claim on the basis of the information available.

Where we conclude that a claim is excessive, relief will be restricted to the amount properly due under the relevant double taxation agreement. Any excessive repayment, or an amount of tax liability improperly discharged, will be recovered by HMRC.

Further information on HMRC enquiries into claims can be found at SACM8000.

Penalties where a claim is incorrect

Claimants are responsible for ensuring that the information provided in support of a claim is complete and accurate.

Where a claimant provides an inaccurate claim, we may charge penalties in accordance with Schedule 24 of the Finance Act 2007.

Penalties for inaccurate quarterly returns

Where a payer notifies HMRC of a failure to deduct, HMRC will also consider whether a penalty is due under Section 98 Taxes Management Act 1970 for an inaccurate CT61 or other quarterly return. Such penalties may be chargeable even where relief is subsequently claimed.