SAIM9310 | Deduction of tax: qualifying private placements: overview

Qualifying private placements

ITA07/S874 requires the deduction of income tax from ‘yearly interest’ arising in the UK, paid by a company, a local authority, a firm in which a company is a partner, or paid by any person to another person whose usual ‘place of abode’ is outside the UK.

SAIM9060 onwards explains this obligation in more detail. SAIM9070 sets out a number of exemptions from the duty to deduct.

Finance Act 2015 introduced a new exemption for yearly interest paid on ‘qualifying private placements’ on or after 1 January 2016. ITA07/S888A sets out the gateway conditions that must be met by a qualifying private placement, and provides a power to make regulations specifying further conditions that must be met for the exemption to apply. These further conditions are set out in the Qualifying Private Placements Regulations 2015 (SI 2015/2002).

What are private placements?

Private placements are a form of unlisted debt. They are commonly defined as securities that are placed privately rather than through a public offering, but are also understood to include any kind of non-bank business lending placed directly with investors. Private placements may be attractive to businesses that do not want to incur the costs of issuing publicly traded debt, which will usually require a credit rating. They may also be appropriate for large infrastructure projects that require stable long-term funding. Investors commonly include, but are not limited to, financial institutions such as insurers and pension funds.

What are qualifying private placements?

Qualifying private placements are debt instruments that, on or after 1 January 2016, meet the conditions in ITA07/S888A(2) and in the Qualifying Private Placements Regulations 2015 (SI 2015/2002).

SAIM9320 explains the conditions set out in the primary legislation in ITA07/S888A (the ‘gateway conditions’).

SAIM9330 onwards explains the further conditions set out in the Regulations.