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The regulations: creditor certificates

Regulation 5 explains what is meant by a ‘creditor certificate�. It notes the certificate must be provided by or on behalf of the creditor. For example, the certificate may be provided by a general partner on behalf of partners who are qualifying creditors. There is no prescribed form for the creditor certificate.

A creditor must meet and certify the following conditions.

Condition A

The creditor must be resident in a ‘qualifying territory�, as defined in TIOPA10/S173. A qualifying territory is explained at INTM652020 and broadly means any territory with which the UK has a double taxation treaty that contains a non-discrimination article. There is no requirement for the treaty to reduce withholding tax on interest to nil. The list of qualifying territories is at INTM412090.

‘Resident� for these purposes takes its meaning from TIOPA10/S167(5) and means being liable to tax in a territory by reason of domicile, residence or place of management. ‘Liable to tax� in this context means being within the scope to tax. Therefore, a creditor that is a pension fund, charity or similar organisation in a qualifying territory can benefit from the qualifying private placement exemption, even if their income is exempt from tax. This is explained at INTM162040.

Condition B

The creditor must be beneficially entitled to the interest on the relevant security for genuine commercial purposes and not as part of a tax advantage scheme. See SAIM9350 for more on meaning of these terms.