Loan from Isle of Man company

Loan from Isle of Man company

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We have a UK resident client who is a director/shareholder in an Isle of Man (IOM) resident company.

We are exploring the possibility of obtaining a loan from this company for our client so that he may finance a UK trading opportunity.

I understand that the Loan to Participator rules for IOM resident companies only applies where the loan is made to IOM resident participators.

I also understand that interest receivable for IOM resident companies is no longer taxable in the IOM.

With the above being the case our client could take a loan from the IOM company with no S419 (or IOM version) being applied, the client could be charged interest which would avoid any benefit in kind charges being applied to the loan, the IOM company would not suffer any tax on the interest and our client could claim UK tax relief on the interest as he is going to apply the money to a UK trade.

I have the feeling I am missing something, are there any UK tax implications for taking such a course of action.

Your thoughts would be very much appreciated.

Regards,
Robbie

Robert Barr

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By AnonymousUser
26th Sep 2006 16:44

S739 ICTA 1988
Wouldn't the income and gains of the IOM company be attributable to your client by virtue of s739/740 ICTA 1988 and s13 TCGA 1992? The Client's set-up appears to be problematic and may need revision.

Additionally, if your Client proposes to conduct a trade in the UK, it may be possible to legally avoid the vast bulk of tax on the profits generated.

If you are interested in pursuing these matters, please e-mail me at [email protected]

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