Q&As

Do the rules that tax profits from trading in and developing UK land affect the UK withholding tax rules?

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Published on LexisPSL on 21/02/2017

The following Tax Q&A provides comprehensive and up to date legal information covering:

  • Do the rules that tax profits from trading in and developing UK land affect the UK withholding tax rules?

The rules introduced in Finance Act 2016 (FA 2016) that tax Profits from trading in and developing UK land (transactions in UK land) did not make any amendments to the requirement in section 874 of the Income Tax Act 2007 (ITA 2007) that imposes an obligation to withhold UK income tax on payments of yearly interest arising in the UK.

Unless an exemption or a relief applies, under ITA 2007, s 874, a payment of yearly interest arising in the UK is subject to UK withholding tax at the basic rate (currently 20%) if made by:

  1. a company (unless it is made by that company in a fiduciary or representative capacity)

  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

‘Arising in the UK’ and ‘UK source’ are normally considered to mean the same thing (see for instance the Upper Tribunal decision in the Ardmore and Perrin case at para [4]).

The authority on the meaning of ‘UK sourc

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