Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Indemnity clause definition

What does Indemnity clause mean? An indemnity clause is a contractual risk-allocation provision under which one party agrees to reimburse (and often hold harmless) another for specified losses, liabilities, costs and expenses, including third-party claims. It is not defined in statute; its effect is determined by common law principles of contractual interpretation across England & Wales, Scotland, Northern Ireland and Ireland, where usage is consistent. Key features include the scope of covered losses, the triggers (breach, acts/omissions or defined risks), caps, procedures for defence of claims, and recovery of legal costs. Courts construe indemnities by their wording; clear words are needed to cover a beneficiary’s...

UK LMA loan agreements: tax indemnity clause—purpose, scope, standard exclusions (FATCA), bank levy and borrower‑friendly drafting

Published by a LexisNexis Tax expert

Practice notes

This Practice Note

sets out:
- the function of the tax indemnity provision commonly included in a loan agreement, and
- that the usual drafting of this provision is lender‑friendly, reducing the borrower’s benefit, and
offers drafting suggestions to help a borrower limit its exposure under the tax indemnity provision

In the sphere of syndicated Loans to corporate borrowers, standard practice is to use one of the Loan Market Association (LMA) model facility agreements. Each of these templates:

includes a standard tax indemnity provision,
is prepared in a lender‑friendly manner, and
assumes the relevant tax is UK withholding tax—identifying the applicable withholding tax jurisdiction is essential and, if it is not the UK, the agreement should be amended accordingly

Model loan agreements issued by the LMA are available to members on the LMA website (www.lma.eu.com)...

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Web page updated on 21/05/2026

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