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TaxVince, Accountant
Category: UK Tax
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Experience:  Chartered Accountant >20 years + Qualified IFA
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I have made a non collateral loan from a lender in uk. I am

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I have made a non collateral loan from a lender in uk. I am a non uk resident from Asia, but the transfer of the funds to my account was on hold for i was asked to pay the final tax corresponding to the loan and tax rule was cited. " 6.1.3 Final Tax on Income Received By Non-Collateral Loan ;•A non-Resident person will only be subject to income tax on income derived from or accruing in The UK. This is subject to the provision that where a non-resident person carries on any trade, business, profession or vocation in The UK, part of the operations of which may be carried on outside The UK, the full gains or profits of that trade, business profession or vocation shall be deemed to be derived from The UK.
It is important to inform you also that the Non-collateral tax Fee of 8,750.00 GBP (Eight thousand, Seven hundred and fifty Great British Pounds only). which is to be immediately deposit with us ."
I just want to verify the veracity of is ruling.

MamaTax :



Its MamaTax Here!

MamaTax :

Thanks for the question.

The spirit of the legislation is to avoid non-residents to have a tax advantage by transferring money from UK entities by way of loan or interest free loan etc. This happens when you get loans from UK entities on NON –commercial terms ie no/low interest or no collateral etc. Hence this is an Anti-avoidance provision – in the case of interest free loans or no collateral loans, the beneficiary is charged a deemed benefit calculated in accordance with subsections (3) to (7) of the Anti-avoidance rules at ICTA88/S736B .

To avoid this situation try to make your loan arrangement as commercial viable as possible ie on the same terms as what a third party lender would have done under the circumstances you are in as the borrower.


MamaTax :

Hope this helps. Let me know if you have any further comments/questions

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