The Upper Tribunal upheld the decision of the First Tier Tribunal (FTT) that the appellant, Hargreaves Property Holdings Limited, should have deducted income tax from interest payments under s874 Income Tax Act 2007 (ITA 2007).

It also ruled that the interest was considered as yearly interest, had a UK source and did not benefit from the withholding tax exemption under s933 (ITA).

Section 874 imposes ‘an obligation on an interest payer to deduct tax if payment of yearly interest arising in the United Kingdom is made’.

The FTT’s decision concerned the application of these withholding tax provisions to loan interest payments made by the appellant.

Hargreaves was the parent company of a property investment, development and construction group in the UK, which financed its activities with loans from various lenders.