Letting and hedging

My client is a Mauritian non-UK resident company that lets property in the UK on a fairly large scale. As part of a refinancing package it entered into an interest rate hedging product arrangement with its bankers.

I have been studying the recent announcement by HMRC regarding their views on the taxation of the various redress elements as a result of the review of interest rate hedging products carried out by the Financial Conduct Authority.

I feel the interest element should be treated as disregarded income because my client company is non-resident for UK tax purposes and it does not conduct any trade in the UK or elsewhere for that matter.

The HMRC statement on interest rate hedging products suggests that the interest element for individuals should be characterised as interest income and for companies it should be subject to corporation tax treated as loan relationship income.

This tends...