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Guarantees revisited

Jenny Doak and Stuart Pibworth (Weil, Gotshal & Manges) revisit some of the key UK corporation and withholding tax considerations to consider on guarantees of financial obligations.

It is common for lenders to require another group company to guarantee a borrower’s obligations under a loan. All parties of course will hope and expect that the guarantee will never be ‘called’. However the current economic dip has unfortunately resulted in lenders and borrowers looking at guarantees more closely. This article revisits some of the key UK corporation and withholding tax considerations to consider on guarantees of financial obligations. Except where otherwise discussed we have assumed that the borrower and guarantor are UK companies and the lender is a UK bank lender.

Nature of a guarantee

To analyse how a guarantee is taxed it is important to understand the nature of the arrangements. Put simply...

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