It is unlikely that work on issues affecting the credit market will alter the current withholding position for interest payment by a British borrower to an unrelated foreign lender or by a foreign lender not linked to an unrelated British lender (subject to a change in foreign law), so that the position will not change for most transactions and banking documents. However, in other cases, some UK-based lenders have used a passport for EU banking services to offer certain services in such schemes, as they are regulated businesses in the UK. Such a pass is expected to be finally lost after Brexit. However, after the end of the current transitional period under the withdrawal agreement with the EU, the UK will be able, in the short term, to retain temporary access to EU financial markets. However, in the longer term, these financial service providers may be excluded from EU credit markets and, as a result, the range of sources of financing available to borrowers may be limited after Brexit. It is not clear whether the loss of a passport would affect the credit facilities received under documents or credits that were renewed prior to withdrawal from the United Kingdom. It is not uncommon for agreements to define the “EU” as members of the European Union from time to time. If the United Kingdom were to be included in such a definition, the parties might not be affected by this definition. References to EU legislation in existing funding documents must also be considered in light of the Interpretation Act 1978 and other interpretive provisions. Stamp duty: Stamp duty clauses in credit documentation should not be affected by Brexit.

While stamp duty is a UK tax, the UK is currently subject to the Capital Duties Directive (69/335/EEC), which prevents the UK from collecting a 1.5% SDRT levy on issues of shares and securities on issuers and clearing services for the means of receiving depositors (although this levy is in UK law). Outside the EU, the UK will be free to impose these and other capital duties after the end of the current transitional period. However, the government has stated that it intends not to reintroduce the charge. The LMA has published a note entitled “Documentary implications of the end of the Brexit transition period for LMA facility Documentation” which consolidates and updates previous Brexit notes published in September 2016 and April 2019, as well as two EU legislative benchmarks. The Brexit ratings and target scales are intended to make unionised credit market participants aware in advance of the changes the LMA will make to its English legal facility documents to reflect the end of the transitional Brexit period. Standard LMA documentation allows payments without deducting withholding tax, provided these payments are made to eligible lenders. The AML documentation provides, in certain circumstances, that the gross payment may take into account a tax deduction. This gross increase should not be caused by the change in qualified lender status, unless the change in status is due to the modification or application of a law or contract. There is the potential for a Brexit without a deal with such an effect.

While, in many cases, withholding tax regimes (including exemptions from tax deductions for interest payments and gross payment of these payments as part of the loan documentation) should not be affected, the situation should in any case be re-examined when it comes to EU-27 entities. These are probably the main points that parties to loan contracts (current and future) will have to consider after the Brexit vote: VAT: although VAT is a tax derived from the EU, VAT clauses in financial documentation are unlikely to be influenced by Brexit.