The taxpayer was the UK resident parent of a group of companies engaged in UK property development construction and investment. The group’s business was funded by loans. In 2004 the group restructured its loans to achieve a more tax advantageous position. This required each lender to assign its right to interest to a Guernsey resident company shortly before the interest was paid. At the same time the lender assigned the principal to another group company. The interest and principal under the relevant loan was then repaid and the lender advanced an amount equal to or larger than the principal of the original loan to fund the payment and repayment.
From 2012 after being assigned to the Guernsey entity the interest was assigned to a UK incorporated and tax resident company before the sums were repaid.
HMRC said the taxpayer should have withheld income tax when paying...
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