Applications for double tax treaty relief from UK withholding tax on interest
Applications for double tax treaty relief from UK withholding tax on interest

The following Tax guidance note provides comprehensive and up to date legal information covering:

  • Applications for double tax treaty relief from UK withholding tax on interest
  • Withholding tax as a cost
  • Double tax treaty relief
  • Entitlement to relief under a double tax treaty
  • Effect of obtaining double tax treaty relief
  • Consequences of double tax treaty relief direction being incorrectly given
  • Obtaining double tax treaty relief
  • DTTP scheme and syndicated loan scheme simplify procedure for double tax relief
  • Practical points

For more information on the other types of exemptions and reliefs from UK withholding tax that are available, see Practice Note: Exemptions and reliefs from UK withholding tax on yearly interest.

Unless an exemption or a relief (including relief under a double tax treaty (DTT)) applies, a payment of yearly interest arising in the UK (ie with a UK source) is generally subject to UK withholding tax at the basic rate (currently, 20%) if it is made by:

  1. a company

  2. a local authority

  3. by or on behalf of a partnership of which at least one partner is a company, or

  4. any person to another person whose usual place of abode is outside the UK (broadly, this means an individual who usually lives outside the UK or a company whose main place of business is outside the UK)

The borrower (as the one making the payment of interest) is responsible for withholding an amount in respect of UK income tax at source (ie withholding directly from the interest payment) and for accounting to HMRC for the tax withheld. Failure to do so can result in the borrower incurring penalties and interest for non-payment and/or late payment of the tax due.

For more information on:

  1. what constitutes interest, see Practice Note: What is interest?

  2. the UK rules requiring income tax to be withheld from payments of