Kitchen sink drama

An Isle of Man bank which is not UK resident and has no UK permanent establishment has made a personal loan to our client a UK tax resident individual. This loan is for a fixed period of five years. We think that the interest payable is thus interest arising in the UK but would be interested to know if anyone has a different view. In these circumstances ITA 2007 s 874 seems to require the person by or through whom the payment is made to deduct income tax. ITA 2007 s 963 covers the collection of such income tax and presumably includes with individuals.

We do not believe that the exceptions in ITA 2007 ss 875 to 888 apply and cannot find any other applicable exemption. Does this mean that an individual must withhold tax at source on interest payments to an...