A high-profile Canadian case has highlighted the questions of how related party loans and guarantees should be priced whether this should be based on the standalone creditworthiness of the borrower and to what extent implicit support from a parent or group should be taken into account. In this article these issues are addressed by reference to the UK legislation both for subsidiaries and branches.
The importance of standalone creditworthiness
HMRC’s view is that related party interest rates should reflect ‘the credit status of the company – often difficult to establish for a company which is not considered on its standalone merits’ (HMRC’s International Tax Manual (INTM) at INTM577030 www.lexisurl.com/INTM). This appears to be a reference to the standalone creditworthiness of a member of a multinational group.
Even if a member of a multinational group has a standalone credit rating ...
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A high-profile Canadian case has highlighted the questions of how related party loans and guarantees should be priced whether this should be based on the standalone creditworthiness of the borrower and to what extent implicit support from a parent or group should be taken into account. In this article these issues are addressed by reference to the UK legislation both for subsidiaries and branches.
The importance of standalone creditworthiness
HMRC’s view is that related party interest rates should reflect ‘the credit status of the company – often difficult to establish for a company which is not considered on its standalone merits’ (HMRC’s International Tax Manual (INTM) at INTM577030 www.lexisurl.com/INTM). This appears to be a reference to the standalone creditworthiness of a member of a multinational group.
Even if a member of a multinational group has a standalone credit rating ...
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