Exemptions and reliefs from UK withholding tax on yearly interest
Exemptions and reliefs from UK withholding tax on yearly interest

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

  • Exemptions and reliefs from UK withholding tax on yearly interest
  • Exemption for short interest
  • Exemption for interest paid on regulatory capital securities
  • Meaning of regulatory capital security
  • Exemption for interest paid by banks in the ordinary course of their business
  • Bank
  • In the ordinary course of a bank's business
  • Exemption for interest on an advance from a bank
  • Exemption for interest paid to a building society
  • UK to UK exemption—exemption for interest paid to UK resident companies, UK permanent establishments and other specified entities
  • More...

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marks the end of the Brexit transition/implementation period entered into following the UK’s withdrawal from the EU. At this point in time (referred to in UK law as ‘IP completion day’), key transitional arrangements come to an end and significant changes begin to take effect across the UK’s legal regime. This document contains guidance on subjects impacted by these changes. Before continuing your research, see Practice Note: What does IP completion day mean for Tax?

FORTHCOMING CHANGE: Finance Bill 2021 will, for interest and royalty payments made on or after 1 June 2021, repeal the UK provisions that implemented the EU Interest and Royalties Directive (IRD), ie repeal:

  1. sections 757–767 of the Income Tax (Trading and Other Income) Act 2005 and related regulations, Exemption from Tax for Certain Interest Payments Regulations 2004, SI 2004/2622, and

  2. sections 914–917 of the Income Tax Act 2007

However, an interest or royalty payment made on or after 3 March 2021 is also caught if it is made in disqualifying circumstances, ie if it is made in connection with arrangements, a main purpose of which is to ensure that the UK provisions giving effect to the IRD continue to apply to it.

Unless an exemption or relief applies, payments of:

  1. yearly interest (or amounts that are treated by tax legislation as payments of

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