Executive Summary
- The Chilean provider can make an ordinary loan to a genuine English limited company without entering the consumer-credit lending activity defined by the borrower's status. The company must receive the credit in its own capacity. This conclusion does not determine anti-money-laundering (AML) registration, payment services, investment activities or funding restrictions. (Financial Services and Markets Act 2000, sections 19 and 22; Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, articles 60B, 60L and 60LB.)
- The recommended first contract fixes principal, the finance obligation and final maturity, while revenue determines intervening instalments. A fall in revenue then reduces those instalments, but leaves the unpaid contractual balance due at maturity. A cap alone does not establish the tax treatment of a return that depends on business results. (Corporation Tax Act 2010, sections 1000(1)(F) and 1015(4).)
- A director's guarantee creates separate recourse without automatically making the director the borrower. Sole traders, certain unincorporated borrowers, trustees and residential security require their own analysis before admission. The business-credit exemption for individuals requires credit exceeding £25,000 and the prescribed business-purpose conditions. (Regulated Activities Order, articles 60C(3), 60L, 60LA and 61.)
- The provider's borrowing and any investor participation must be assessed separately from its loans to companies. An institutional label does not satisfy every deposit, promotion or fund exemption. Individual funders can bring an electronic lending system within the peer-to-peer lending activity even when every borrower is incorporated. (Regulated Activities Order, articles 5, 6 and 36H.)
- Chile's Fintec law regulates defined services. Retaining a loan for the provider's own account differs from advising third parties, matching funders, holding their assets or originating instruments for onward sale. Registration and service authorisation are separate questions, and the current qualified-investor relief preserves registration. (Law 21.521, articles 3–7; CMF NCG 502, sections I.A, II.F and II.G.)
- Chilean credit, AML and foreign-exchange duties remain relevant to the originator. Factoring is expressly within Chile's AML reporting categories. Outbound loans and foreign institutional borrowing require separate exchange and reporting treatment under the rules effective from 1 January 2026. (Laws 18.010 and 19.913; Banco Central de Chile, Compendium of International Exchange Regulations, Chapter II.B.IV.)
- Receivables purchase requires an effective transfer of identifiable claims, enforceable customer rights and a workable collection arrangement. Consumer contracts and foreign-law receivables make assignment restrictions material. Broad recourse requires review of the intended sale structure and the rights actually transferred. (Law of Property Act 1925, section 136; Business Contract Terms (Assignment of Receivables) Regulations 2018, regulations 2–4; Rome I Regulation, article 14.)
- Receiving the provider's own repayments through a regulated bank is compatible with the initial lending model. Providers that hold customer revenue for others, initiate payments or supply account information need a fresh assessment. Lending and factoring can also attract UK AML duties independently of consumer-credit authorisation. (Payment Services Regulations 2017, regulation 2 and Schedule 1; Money Laundering Regulations 2017, regulations 8–10 and Schedule 2.)
- UK-source yearly interest ordinarily requires withholding unless an exception or authorised treaty relief applies. The ordinary UK-Chile treaty ceiling is 10% of gross interest; a 4% rate requires a qualifying recipient and satisfaction of the relevant conditions. The contract must allocate withholding and any gross-up before pricing is agreed. (Income Tax Act 2007, section 874; UK-Chile Double Taxation Convention, article 11 and exchange of notes, as modified through the most-favoured-nation provision; SII Circular 22 of 2018, section II.4.)
The first product should create a clear corporate debt
The provider should initially lend as principal to companies that contract, receive funds and conduct their own businesses. Its institutional creditors should have claims against the provider under separate funding agreements. Giving funders direct loan interests, individual loan selection or participation in a managed portfolio changes the legal analysis.
The proposed borrower payment is a contractual debt if the borrower promises repayment without transferring customer claims. Calling that payment a purchase of future revenue does not create an assignment. A proprietary transfer requires an intention to transfer identifiable rights; an ordinary payment undertaking leaves the financier dependent on the company's ability to pay. The Court of Appeal applied that distinction in Phoenix Group Foundation v Harbour Fund II LP [2023] EWCA Civ 36, paragraphs 53–62, 86–87 and 114–115.
For the first loan, the recommended design fixes the principal and finance obligation separately. It should state a final maturity and make the remaining contractual balance payable then. Revenue determines the scheduled instalments before maturity. This is a proposed product choice: a contract under which the financier permanently bears low-revenue risk would require different repayment, characterisation and tax treatment.
The calculation can remain simple. Multiply the agreed percentage by qualifying revenue for the reporting period, then apply the remaining payment cap. If qualifying revenue halves, the instalment also halves, provided the percentage, deductions and other conditions stay unchanged and no floor or cap intervenes. The arithmetic does not forgive the remaining debt. A borrower facing a large maturity balance would need an agreed extension, refinancing or another contractual solution.
The contract should specify whether revenue means cash received or amounts invoiced. It should identify the financed entity, covered sales, reporting periods and currency conversion method. Refunds, chargebacks, taxes, processor fees and intercompany receipts need express treatment. An amount deducted when measuring revenue should not be deducted again when calculating the instalment.
The payment cap must identify which amounts count towards it. Fees, default sums, enforcement costs and tax gross-ups can otherwise make a quoted cap misleading. Voluntary prepayment should have an agreed price and treatment of unearned finance charges. These are commercial drafting choices, subject to any applicable mandatory prepayment rights; the agreed allocation must match the product offered to borrowers. In a transaction to which Chilean Law 18.010 applies, article 10 gives debtors other than CMF-supervised institutions, the Chilean Treasury or the Central Bank a non-waivable prepayment right where principal does not exceed 5,000 UF. It requires payment of the prepaid capital and interest accrued to payment, with any commission capped at one month's agreed interest on that capital for non-indexed operations or one and a half months for indexed operations; prepayments below 10% of the outstanding balance require creditor consent. (Law 18.010, article 10.)
Corporate status determines the ordinary UK credit boundary
An ordinary limited company borrowing in its own capacity falls outside the borrower class for regulated consumer-credit lending. Article 60B covers entering into a regulated credit agreement as lender and exercising the lender's rights under it. Article 60B(3) defines the ordinary agreement by reference to an individual or a relevant recipient of credit. Article 60L defines the latter as a partnership of two or three persons not all of whom are bodies corporate, or an unincorporated body that is neither a partnership nor composed entirely of bodies corporate. An ordinary incorporated company falls outside those categories. (Regulated Activities Order, articles 60B(1)–(3) and 60L(1).)
The provider must identify the true contracting debtor and recipient. Incorporation documents, board authority, business use and the disbursement trail should support the company loan. A company used as a nominal contracting party for an individual's borrowing would undermine the stated basis. The size of the business and the revenue formula do not create the exclusion.
Green Deal plans have special treatment under article 60LB. The initial business-finance contract should be an ordinary loan, outside that statutory product. A statement that every loan connected with a company is unregulated would ignore this distinction. Acquiring or servicing a portfolio containing regulated credit agreements also requires separate treatment under articles 60B(2) and, as applicable, 39F–39H.
A sole trader is an individual borrower. The business exemption in article 60C(3) requires credit exceeding £25,000 and an agreement entered wholly or predominantly for the borrower's business. The prescribed declaration creates a rebuttable presumption; contrary knowledge or reasonable cause to suspect a different purpose can defeat it. Loans at the threshold do not satisfy the amount condition. (Regulated Activities Order, article 60C(3), (5) and (6).)
An exempt business loan to an individual also needs separate broking and unfair-relationship analysis. Article 36A(4) disregards the article 60C(3) exemption for relevant credit-broking purposes. The court's powers under sections 140A–140C of the Consumer Credit Act 1974 extend beyond the ordinary regulated-agreement category. The first borrower policy should therefore exclude individuals and unincorporated businesses instead of relying on a business-purpose declaration alone.
Guarantees and home security require separate decisions
A director who guarantees the company's debt does not become the recipient of credit solely by giving that guarantee. Article 60LA expands certain references to borrowers for the purposes of that article; it does not replace the debtor definition in articles 60B(3) and 60L. Section 140C(1) of the Consumer Credit Act likewise requires an individual debtor under the main credit agreement. The distinction changes if the director is a co-borrower or receives personal credit. (Regulated Activities Order, articles 60B(3), 60L and 60LA(3); Consumer Credit Act 1974, section 140C.)
A guarantee still needs its own enforceability review. Its amount, duration, demand conditions, variation provisions and release should be explicit. The lender should verify execution, informed consent and the need for independent advice. Non-commercial sureties and mixed personal transactions can raise undue-influence duties. Waller-Edwards v One Savings Bank plc [2025] UKSC 22, paragraphs 55–61, explains the lender's responsibilities in that setting; those facts should not be assumed for every commercial director's guarantee.
The proposed launch excludes residential property security. Article 61's regulated-mortgage definition ordinarily requires credit to an individual or trustees, a land mortgage and its specified dwelling-use conditions. A corporate trustee differs from an ordinary company borrowing beneficially. Taking a director's home as security therefore requires analysis of the borrower, guarantor, ownership and occupation, together with the guarantee itself. It should be a separate product decision before the property is accepted. (Regulated Activities Order, article 61(3) and (4).)
The provider's funding must remain distinct from investor participation
Own capital provides the clearest initial funding source. Bilateral institutional borrowing can also fit the proposed model when the lender's actual status and business support the applicable exclusions. The provider should borrow on its own account and remain responsible for that debt, while holding the borrower loans for itself.
The UK deposit definition is broader than retail savings. Article 5 includes repayable money used for lending or materially financing the recipient's activities. Article 6(1)(b) excludes money paid in the course of a business consisting wholly or to a significant extent of lending money. Article 6(1)(a)(ii) separately covers specified authorised deposit-taking or insurance businesses. The name of an institution cannot establish those facts. Territorial scope also requires examination of where the funding activity occurs. (Regulated Activities Order, articles 5 and 6; Financial Services and Markets Act 2000, section 418.)
Debt securities create further conditions. Article 9 contains an exclusion for receipts from the issuer's own specified debt instruments, with additional conditions for commercial paper maturing in less than one year. The own-issue exclusion from dealing as principal does not settle financial promotions or public-offer restrictions. The first funding documents should therefore identify each creditor, its qualification, the instrument and any transfer or solicitation rights. (Regulated Activities Order, articles 9 and 18.)
An institutional loan to the provider differs from a funder's beneficial interest in the company's loan portfolio. Shared returns, restricted recourse to a pool and investment-management powers can change the nature of the arrangement. The provider should hold any proposed participation product until its securities, fund, promotion and territorial requirements have been resolved.
Chile regulates the service supplied by the originator
The proposed retained loan does not by itself constitute a service listed in Chile's Fintec law. Chile's financial regulator, the Comisión para el Mercado Financiero (CMF), supervises those services. The statutory financial-instrument definition covers debt contracts and invoices. Its service definitions still require the relevant activity. A lender deciding whether to advance its own money differs from supplying credit evaluations or recommendations to third parties. An internal credit assessment should remain part of the lender's own decision. (Law 21.521, articles 2 and 3(1), (8) and (9).)
The strongest competing characterisation arises where the provider originates loans with a prior intention to sell them to funders. Intermediation includes dealing as principal with a prior intention to sell or buy the same instruments to or from a third party. CMF general rule NCG 502 contains a limited exclusion where the sole disposal purpose is pledge, security, custody or collection. An outright onward sale to refinance the provider should not be assumed to satisfy that wording. (Law 21.521, article 3(9); CMF NCG 502, section II.F.)
A physical or online service that publicises financing needs and connects them with available capital can be a crowdfunding platform. Routing third-party purchase or sale orders is separately defined. Holding financial instruments or specified related money for others can be custody. The first model should avoid those third-party functions; borrower listings, investor selection, onward assignments or client balances require a new service assessment. (Law 21.521, article 3(5), (6), (10) and (13).)
Professional providers of the listed services generally need entry in the CMF's Register of Financial Service Providers (RPSF), followed by the relevant service authorisation. A registration entry does not itself authorise every service. The statute also contains defined exceptions for existing regulated institutions. Those exceptions depend on the institution and service, not the presence of an institutional funding partner. (Law 21.521, articles 5–7.)
The provider must satisfy the UK tests separately where its conduct falls within UK scope. CMF registration does not confer permission to undertake a UK regulated activity. (Financial Services and Markets Act 2000, sections 19, 22 and 418.)
The Chilean connection depends on the services and operations. NCG 502 covers material provision in Chile through physical or electronic means and communications directed at Chilean residents. British borrowers or foreign financial instruments do not alone place a regulated service outside that territory. The retained-loan recommendation rests on the activity supplied, rather than a claimed exemption for all foreign customers. (CMF NCG 502, section I.A.)
CMF exemptions have different requirements
The current qualified-investor exception in section II.G preserves RPSF registration. It can relieve eligible providers of authorisation and the specified NCG requirements for investment advice, credit advice, crowdfunding, order routing and alternative trading. It does not extend that relief to intermediation or custody. The provider must satisfy the specified ten-year record requirements, including the relevant group and management persons, and provide services in Chile only to qualified investors. (CMF NCG 502, section II.G, as amended by NCG 524.)
The required declaration accompanies registration and must be updated annually. A change in qualifying circumstances requires the provider to cease the affected services until authorised. Qualified-investor status and the relevant record must therefore be established under the rule; a generic institutional description is insufficient. Separate exceptions concerning exclusive corporate purpose and Chilean domicile do not eliminate registration. (Law 21.521, article 4; CMF NCG 502, sections I.C and II.G.)
NCG 559, issued on 9 February 2026, added a notification procedure for specified institutions already covered by article 5's statutory registration exceptions. It requires notification before the eligible service starts. It does not grant an ordinary finance company a new permission merely because that company lends to businesses. A platform or investment-service expansion should be held until its own registration, authorisation or applicable exception has been established. (CMF NCG 559, operative amendment introducing section X of NCG 502; Law 21.521, article 5, second paragraph.)
Chilean funding, credit and AML rules apply separately
The initial funding policy should prohibit public invitations to provide repayable money. Article 39 of Chile's General Banking Law restricts unauthorised habitual receipt of money from the public, whether by deposit, loan or another form. It also addresses money or credit brokerage. Identified bilateral institutional facilities fit a narrower factual pattern than public fundraising, but their actual distribution and terms still matter. (General Banking Law, DFL 3 of 1997, article 39.)
Chile's money-credit statute can classify a transaction differently from an English-law sale analysis. Article 1 of Law 18.010 includes discounting documents representing money, with or without recourse against the assignor. Article 2 looks at consideration above capital when identifying interest. Describing the return as a fee or purchase discount cannot settle the statutory treatment. (Law 18.010, articles 1 and 2.)
Article 1 also excludes credit transactions corresponding to aleatory contracts, involving an uncertain gain or loss, from Title I. A contingent-return product therefore needs separate classification. Revenue-based instalments do not, by their label alone, establish that exclusion for the proposed repayable debt. (Law 18.010, article 1, final paragraph; Chilean Civil Code, article 1441.)
Article 5's interest exceptions do not exempt every loan to a foreign trading company. Borrowing by the Chilean provider from a qualifying foreign or international bank or financial institution may satisfy article 5(a); that does not exempt its separate onward loan to an English trading company. The foreign-currency foreign-trade exception also requires the relevant trade connection; denomination in sterling alone is insufficient. Pricing must account for any applicable limits and the consequence of an excessive rate under article 8. (Law 18.010, articles 5, 6 and 8.)
Whether those rules apply to this English-law facility must be resolved before pricing. Chile's Civil Code addresses foreign contracts for performance in Chile; its Commercial Code also preserves room for a contrary agreement. The parties must examine the actual places of conclusion and performance and any applicable mandatory rules. (Chilean Civil Code, article 16; Chilean Commercial Code, article 113.)
The duties administered by Chile's Unidad de Análisis Financiero (UAF) require a separate entity and activity assessment. Law 19.913 expressly lists factoring businesses and specified financial-service providers. An entity within article 3 must register with the UAF and appoint a responsible officer under article 40. The initial lender should determine its status under the financial-institution and other applicable categories; absence of a Fintec service does not establish an AML exemption. (Law 19.913, articles 3 and 40.)
An in-scope provider must implement the UAF's current prevention, due-diligence, beneficial-ownership and suspicious-operation procedures. Circular 62 replaced the specified earlier circulars from 1 June 2025. The bank or payment provider's checks cannot substitute for duties imposed directly on the finance company. A receivables-purchase launch should include the factoring registration and control requirements from the outset. (UAF Circular 62 of 19 March 2025, Primero A–C, F–G and J; Cuarto; Sexto.)
Outbound loans and inward funding need separate exchange reporting
The Banco Central de Chile (BCCh) replaced its former foreign-exchange chapters and manual from 1 January 2026. The relevant current provisions are Chapter II.B.IV of the Compendium of International Exchange Regulations and Operating Regulations II.6 and II.7. The provider's loan to the English borrower creates an external asset; borrowing from a foreign institution creates a separate external liability. (BCCh Agreement 2617-03-240125, resolution 1; Compendium, Chapter II.B.IV, paragraphs 16–26.)
The provider should establish the required formal exchange market channel, transaction reports and balance reports before the first transfer. Funds already held abroad can alter the channel requirement without removing direct reporting duties. Payments received offshore and reinvested there still need assessment. A regulated UK payment provider does not become a member of Chile's formal exchange market solely through its UK status. (Compendium, Chapter I, section IV, and Chapter II.B.IV, paragraphs 18–20 and 25–26.)
The operation's size, monthly changes, accumulated balances and treatment of proceeds determine different obligations. Foreign institutional borrowing has separate requirements for reporting its terms and changes, even when funds remain abroad. The provider should appoint a reporting owner and reconcile bank reports with its direct submissions. It should not assume that a bank transfer completes every asset or liability report. (BCCh Operating Regulations II.6, systems 6.1–6.2, and II.7, systems 7.1–7.3.)
UK AML obligations depend on the business carried on
Corporate lending can be subject to UK AML supervision even when article 60B authorisation is unnecessary. The Money Laundering Regulations include lending, factoring with or without recourse, and financing commercial transactions within the financial-institution activities. Their application depends on business carried on in the United Kingdom. The Financial Conduct Authority (FCA) supervises the relevant Annex 1 financial institutions and maintains their register. (Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, regulations 7–10, 55 and 56(5), Schedule 2, point 2.)
The recommended initial operating choice is to originate and underwrite from Chile, without a UK operational establishment. The FCA's registration guidance states that a firm with no UK office or other UK activity apart from a UK client is likely outside UK business for this purpose. That is supervisory guidance, rather than an absolute statutory exemption. UK staff, agents, decision-making or services can alter the result. (FCA, Money laundering and terrorist financing registration, updated 2 October 2026.)
The provider should resolve the territorial analysis before establishing UK operations. For an in-scope operation, completing Annex 1 registration should be a launch condition. Regulation 56(5) also recognises a pending application within its statutory restriction. Registration is distinct from permission to undertake other regulated activities.
An in-scope lender needs its own risk assessment, policies, internal controls, customer and beneficial-owner checks, monitoring, training and records. The borrower's bank conducting its own checks does not establish that the lender has discharged those duties. The provider should identify who makes decisions, who reviews unusual activity and which records substantiate each borrower relationship. (Money Laundering Regulations, regulations 18–21, 24, 27, 28 and 40.)
Collection should pay the lender without creating another service
The proposed banking or payment channel should deliver amounts owed to the provider as creditor. FCA guidance confirms that simple lending and receiving loan repayments do not constitute payment services. The lender acts as a payment user and payee in that arrangement. (Payment Services Regulations 2017, regulation 2 and Schedule 1; FCA PERG 15.3, Q16.)
The position changes if the provider collects all merchant revenue, retains its share and remits balances belonging to the borrower or investors. The account name alone cannot determine ownership or the service supplied. Payment initiation and account-information services can arise without the provider holding funds. The technical-services exclusion expressly preserves those two regulated categories. (Payment Services Regulations, regulation 2, Schedule 1, paragraphs 1(g)–(h) and 2(j).)
Not every ancillary transfer constitutes a separate payment-service business. The FCA's guidance requires attention to whether the activity is a regular occupation or business activity. The parties should map the actual mandate, instructions, account access, receipts, refunds and residual balances. Delegating execution to a regulated bank does not determine whether the provider itself supplies a further service. (FCA PERG 15.2, Q9; Payment Services Regulations, regulation 138.)
The initial reporting process should use revenue information supplied by the borrower. Direct online access to payment accounts requires a separate assessment of the provider's role and the account-information service, even where access is read-only. The applicable definitions and exclusions are in regulation 2(1) and Schedule 1 of the Payment Services Regulations.
Money held for investors during investment business can engage the FCA client-money rules; payment-service safeguarding has a different basis. The provider's own earned repayments do not become client money merely because they pass through a bank. The legal entitlement to each balance, the regulated activity and the applicable rules must be assessed together. (FCA CASS 7.10.1R; Payment Services Regulations, regulation 23; FCA CASS 15.1.1G–15.1.3R.)
A platform changes the relationship with funders
A system that connects funders and borrowers needs its own activity analysis. Credit broking under article 36A concerns the defined individual or relevant-recipient borrower categories. An introduction confined to ordinary corporate borrowers therefore differs from broking credit to sole traders. Articles 17 and 31 also contain material exclusions for accepting indebtedness instruments connected with lending by the acceptor or principal. These provisions prevent the assumption that every corporate-loan introduction is investment dealing or arranging. (Regulated Activities Order, articles 17, 31 and 36A.)
Article 36H can capture electronic lending involving a company borrower and an individual or relevant-person lender. That lender category includes the specified small partnerships and unincorporated bodies. The operator must satisfy the system's cumulative conditions concerning availability of agreements, receipt and payment, and debt collection or exercise or enforcement of lender rights. Arranging for another person to perform the relevant functions can count. The defined agreement also requires the operator not to be the creditor, debtor or relevant assignee. A banking partner for collections does not by itself remove this activity. (Regulated Activities Order, article 36H(1)–(6) and (9).)
Genuine corporate lenders and corporate borrowers may fail those party conditions, yet investment rules still depend on the rights offered. Loan assignments, notes, fund interests, advice and custody require their own tests. Public securities offerings through an electronic system can also engage article 25DB, which became fully operative on 19 January 2026. The public-offer prohibition and exemptions require separate application. (Regulated Activities Order, articles 25, 25DB and 77; Public Offers and Admissions to Trading Regulations 2024, regulation 12 and Schedule 1.)
An investor pool can be a collective investment scheme where participants share income or profits from property, lack day-to-day control, and the contributions or returns are pooled or the property is managed as a whole. Those final conditions are alternatives. The statutory exclusions must also be tested. Most corporate bodies receive a specific exclusion from that definition, but a corporate vehicle can still constitute an alternative investment fund. (Financial Services and Markets Act 2000, section 235; Collective Investment Schemes Order 2001, Schedule, paragraphs 6A and 21.)
An alternative investment fund raises capital from a number of investors to invest under a defined investment policy for their benefit. Its legal form does not settle the classification. A provider managing from Chile must assess which UK management and marketing rules apply to its activities. The provider should therefore exclude retail pools and managed loan participation from the initial model. (Alternative Investment Fund Managers Regulations 2013, regulations 3, 58 and 59; Regulated Activities Order, articles 51ZC and 51ZE.)
Funder-facing communications must also satisfy section 21. A business invitation or inducement to investment activity needs an authorised communicator, valid approval or an applicable exemption. An overseas communication can fall within the restriction if capable of having an effect in the United Kingdom. The investment-professional exemption has recipient and communication conditions; calling an audience institutional does not meet them automatically. (Financial Services and Markets Act 2000, section 21; Financial Promotion Order 2005, article 19.)
A receivables purchase needs claims that can actually be transferred
A purchase should transfer identified customer claims for an agreed price. Revenue expected from customers who have not contracted is different from an existing debt. An agreement for value to assign future receivables can operate in equity when those receivables arise, provided the agreement identifies the property and expresses a sufficient intention to transfer it. The seller's promise to remit future payments alone does not establish that transfer. (Phoenix Group Foundation v Harbour Fund II LP [2023] EWCA Civ 36, paragraphs 53–62 and 104–110.)
Section 136 requires an absolute assignment in writing, signed by the assignor, together with express written notice to the debtor. An assignment by way of charge only does not satisfy it. The transferred claim remains subject to prior equities. A partial assignment or future receivable requires its own equitable analysis. (Law of Property Act 1925, section 136(1).)
The purchaser needs the customer contracts, evidence of performance, an identifiable receivable pool and an agreed notice process. Subscription cancellations, refunds, chargebacks and customer defences can reduce what is recoverable. The documents should allocate those risks and identify the owner of collections before and after each transfer. An accounting description of a sale cannot cure a defective assignment.
The 2018 receivables regulations can invalidate certain contractual assignment restrictions, but contain substantial exclusions. A contract involving a customer acting outside a trade, business or profession is excluded. Consumer subscriptions and online purchases therefore cannot be treated as automatically transferable under those regulations. Financial-services contracts and the other specified exclusions also require examination. (Business Contract Terms (Assignment of Receivables) Regulations 2018, regulations 2–4, especially regulation 4(c).)
An English sale agreement does not settle every customer's position. Under article 14(2) of Rome I, the law governing the assigned claim determines assignability, the relationship with the debtor, the conditions for invoking the assignment and discharge. The provider should initially restrict any purchase product to claims whose governing law, transfer restrictions and collection rights it can establish. Third-party priority needs separate consideration. (Rome I Regulation, article 14(1)–(3).)
Recourse should identify the specific risk returned to the seller. Liability for non-existent receivables, fraud or breach of eligibility differs from an unrestricted obligation to repay the funding regardless of collections. The review should test whether repayment, repurchase or redemption rights leave the transaction operating as security for a debt. No conclusion should rest on recourse alone. The documents should establish who owns the claims, bears credit losses and receives any surplus. The initial loan avoids presenting an uncertain transfer as completed asset ownership.
Reporting failures and security determine the lender's remedies
Revenue reporting should reconcile accounting records, processor statements and actual receipts. The agreement should permit proportionate checking, correction and audit. An inadvertent error should produce a corrected report and payment adjustment under an agreed cure process. Deliberate concealment, diversion or forged records can justify different remedies. A missing report should not automatically be described as fraud.
A genuine revenue decline is not a payment default where the contractual instalment falls under the agreed formula. Default should attach to failure to pay an amount actually due, material reporting breach or another defined event. The contract should state the accelerated balance and prevent double recovery. Any additional obligation triggered by breach needs consideration under the penalty doctrine. Cavendish Square Holding BV v Makdessi; ParkingEye Ltd v Beavis [2015] UKSC 67, paragraphs 13 and 32–35, distinguishes primary obligations from secondary obligations imposing detriment out of all proportion to the innocent party's legitimate interest in performance.
If the lender takes security from an English company, the prescribed particulars and a certified copy of the security instrument ordinarily require delivery to Companies House within 21 days beginning the day after creation. Failure makes the security void against the liquidator, administrator and creditors, while the underlying debt becomes immediately payable. Filing does not establish every aspect of validity or priority. (Companies Act 2006, sections 859A and 859H.)
A charge over book debts is not fixed merely because the document uses that word. The borrower's ability to use collections matters. A purported blocked account must operate as blocked; freedom to spend the proceeds can support floating-charge treatment. Collection control must also be reconciled with the payment-service analysis. (National Westminster Bank plc v Spectrum Plus Ltd [2005] UKHL 41, paragraphs 138–141 and 160.)
Unsecured lending leaves the provider exposed to the borrower's insolvency and asset position. Security and guarantees improve the available claims only to the extent they are valid and supported by assets. During administration, statutory restrictions can prevent security enforcement or legal process without the administrator's consent or court permission. The lender should assess existing charges, competing creditors and recoverable assets before funding. (Insolvency Act 1986, Schedule B1, paragraph 43(2) and (6).)
Revenue-linked returns need their own tax classification
The finance obligation should be reviewed before the parties assume that all payments are deductible interest. Section 1015(4) of the Corporation Tax Act 2010 covers securities where consideration for using principal depends to any extent on the results of the company's business. Section 1000(1)(F) can treat the resulting payment as a distribution. Unsecured instruments are not excluded merely because they lack security. (Corporation Tax Act 2010, sections 1000(1)(F), 1015(4) and 1117.)
HMRC's published interpretation includes gross receipts within business results. A return calculated from revenue can therefore raise the issue even where the parties never refer to profit. A fixed maximum payment also leaves the question whether the actual consideration depends on results. The recommended fixed debt with revenue-based instalments makes the payment obligation clearer, but does not create a tax safe harbour. (HMRC Company Taxation Manual, CTM15520.)
Distribution classification can affect deduction under section 1305 of the Corporation Tax Act 2009. The domestic exception for payments to another company within UK corporation tax must be read alongside the treaty's non-discrimination provision. Article 22(4) of the UK-Chile Convention requires qualifying payments to a Chilean resident to be deductible on the same conditions as payments to a UK resident, subject to its specified exceptions. A categorical statement that every revenue-linked payment to the Chilean lender loses deduction would omit that provision. The actual return, recipient status, connected-party position and treaty conditions determine the tax analysis. (Corporation Tax Act 2010, section 1032; Corporation Tax Act 2009, section 1305; UK-Chile Convention, article 22(4).)
Treaty relief requires eligibility and a withholding process
The UK payer must determine whether the payment is UK-source yearly interest and whether a statutory exception applies. Section 874 ordinarily requires deduction at the statutory rate applicable when payment is made. Treaty relief must follow the applicable procedure; the contract cannot remove the payer's statutory duty. HMRC guidance requires the relevant authority for relief at source before the payer relies on a reduced deduction. (Income Tax Act 2007, section 874; HMRC Savings and Investment Manual, SAIM9210.)
The UK-Chile Convention's original printed general interest rate of 15% has been modified. Its exchange of notes extends qualifying lower rates later agreed by Chile with an OECD member. The Chile-Japan Convention activated that mechanism. The ordinary ceiling is 10% of gross interest, with 4% of gross interest available for specified recipients. SII Circular 22 of 2018 records the agreed UK application and the relevant conditions. (UK-Chile Convention, article 11 and exchange of notes concerning articles 11(2) and 12(2); Chile-Japan Convention, article 11(2) and (3); SII Circular 22 of 2018, section II.4, pages 8–10.)
For this provider, the material 4% category concerns an enterprise substantially deriving gross income from actively and regularly lending or financing transactions with unrelated persons, where it is also unrelated to the debtor. A single corporate loan does not establish that business profile. For this category, the specified back-to-back or equivalent arrangement restriction restores a 10% ceiling. Institutional borrowing should be examined for its actual terms and payment obligations; borrowing alone does not establish that every lender is a conduit. (SII Circular 22 of 2018, section II.4, pages 8–10; HMRC Double Taxation Relief Manual, DT4852.)
The recipient must satisfy treaty residence and beneficial ownership. A debt effectively connected with a UK permanent establishment, excessive payments between related parties and the principal-purpose test can change the result. A payment treated as a dividend under the Convention cannot simply use its interest rate. The parties should obtain a documented tax classification and relief process before fixing net receipts. (UK-Chile Convention, articles 4, 10 and 11(2)–(4) and (6); Multilateral Instrument, article 7(1).)
The agreement should allocate lawful withholding, any gross-up, cooperation with relief applications and credit for later refunds. It should also specify how those amounts interact with the payment cap. Otherwise an apparent revenue-linked price can change when the borrower must deduct tax.
A Chilean resident or domiciled company is generally taxable on income from Chile and abroad. Article 21(1)(a) of the Convention provides credit for qualifying UK tax on the same income, subject to Chilean law. UK withholding is therefore one component of the provider's tax position. The financing calculation should reflect the Chilean charge and available credit as well as the borrower's payment. (Chilean Income Tax Law, DL 824, article 3; UK-Chile Convention, article 21(1)(a).)
UK presence and revenue data create further obligations
Operating from Chile is a proposed initial restriction, separate from the express company-only borrower policy. A UK place of business can require overseas-company registration. A tax permanent establishment and UK business for AML purposes involve different tests. The domestic agency permanent-establishment rules changed for chargeable periods beginning on or after 1 January 2026; the treaty test must still be applied separately. The parties should assess premises, personnel, management and agents before adding a UK origination or servicing team. (Overseas Companies Regulations 2009, regulation 4; Corporation Tax Act 2010, sections 1141–1142; UK-Chile Convention, articles 5 and 7.)
The reporting process should use aggregate company revenue where it will answer the lender's question. Identifiable customer or director information needs a lawful processing basis, appropriate access controls and data minimisation. Chile does not appear in the UK's adequacy destinations, so a restricted transfer needs another lawful route. Where appropriate safeguards under article 46 are used, the current data protection test must also be satisfied. (UK GDPR, articles 5(1)(c), 6, 32 and 46(1A), (6)–(8); ICO, International transfers guidance.)
The deployment date also matters for the Chilean data regime. For processing to which Chilean law applies, the existing Law 19.628 already imposes requirements concerning lawful processing, confidentiality, permitted purposes and due care. The substantive amendments under Law 21.719 take effect on 1 December 2026 and apply their territorial rules to controllers or processors established in Chile. A product that continues beyond that date should incorporate the new duties into its reporting arrangements. (Law 21.719, article 1, new article 1 bis of Law 19.628, and first transitional article; Law 19.628, articles 4, 7, 9 and 11.)
Forum and enforcement should follow the assets
English governing law and an English court clause fit loans to English companies with assets in England and Wales. The governing-law choice remains subject to applicable mandatory rules and does not determine the law governing assigned customer claims. A borrower default still requires proof of the debt, compliance with the contract and access to assets. (Rome I Regulation, articles 3 and 14.)
The documents should establish a reliable service mechanism for the Chilean party, including a maintained English process-agent appointment where chosen. CPR 6.11 permits contractually agreed service for a claim solely in respect of the contract. Qualifying jurisdiction-clause and related contract claims can use the permission-free routes in CPR 6.33(2B), subject to the rule's conditions and statement of grounds. Other claims require their own service-out analysis. Overseas service must comply with CPR 6.40 and the destination's law. (Civil Procedure Rules, rules 6.11, 6.33–6.37 and 6.40.)
Chile is not a party to the Hague 2005 Choice of Court Convention or the Hague 2019 Judgments Convention. An English jurisdiction clause therefore does not create a recognition route under those conventions for Chilean assets. Chile's Code of Civil Procedure provides for treaty, reciprocity and domestic recognition routes, with recognition proceedings before its Supreme Court. Service, opportunity to defend, finality and the other statutory conditions must be addressed before local execution. (HCCH, status tables for the 2005 and 2019 Conventions; Code of Civil Procedure of Chile, articles 242–251.)
Arbitration offers a separate treaty route because the United Kingdom and Chile are parties to the New York Convention. A suitable clause should state the seat, rules, language and intended coverage of related guarantees. Recognition still depends on the Convention and domestic requirements; procedural defects, non-arbitrability and public policy can defeat enforcement. The provider should compare the likely claim size and location of assets with the cost of the chosen process before using the clause. (New York Convention 1958, articles III–V; UN Treaty Collection, Convention status record; Chilean Law 19.971, articles 35 and 36.)