The Double Taxation Relief (Taxes on Income) (Foreign Loan Interest) Regulations 1988
Section 65 of the Finance Act 1982 (as amended by section 67 of the Finance (No.2) Act 1987) provides that the amount of the credit for foreign tax on loan interest allowable against income tax or corporation tax charged on the profits of the lender is to be limited by treating the amount of the foreign loan interest as reduced by an amount equal to the lender’s financial expenditure in relation to the loan which is attributable to the period for which the interest is paid. These Regulations specify matters to be taken into account in determining the amount that it is just and reasonable to attribute to the financing of the loan, in cases where the amount of the lender’s financial expenditure in relation to the loan is not readily ascertainable, and make provision with respect to the determination of certain market rates of interest.