Compensating adjustments generally apply to UK – UK lending only, since HMRC has no influence over the recognition of profits by foreign parties. However, there may still be a benefit to an overseas company which is lending cross-border to the UK in making a compensating adjustment claim, if non-arm's length interest costs have been disallowed in the borrower's tax computation, since a claim under S174 or S182 (INTM413140) acts as a gateway to S187. S187 then explicitly says that the non-arm's length amount of interest is not subject to the withholding regime at Part 15 of ITA 2007, specifically ITA07/S874.
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