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...

Unless an exemption or relief applies, payments of:

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

  2. which have a UK source

are subject to UK withholding tax at the basic rate (currently, 20%) (for more detail, see Practice Note: UK withholding tax on yearly interest).

For an overview of UK withholding tax on yearly interest, see: UK withholding tax—overview.

The key UK withholding tax exemptions detailed in this Practice Note include the exemptions for:

  1. short interest

  2. interest paid on regulatory capital securities

  3. interest paid by banks in the ordinary course of their business

  4. interest on a bank loan

  5. interest paid to a building society

  6. interest qualifying for the UK to UK exemption

  7. interest on a quoted eurobond

  8. interest on a qualifying private placement

  9. interest paid on peer-to-peer (P2P) lending

  10. interest distributions from certain funds

  11. interest paid to an associated EU company, and

  12. interest under a double tax treaty

References in this Practice Note to gross payments are to payments from which tax has not been, and is not required to be, deducted.

Whether or not a payment is subject to withholding tax may affect the drafting of relevant documentation, such as:

  1. whether or not to offer a gross up, and

  2. exclusions applicable to any such gross up

For more detail on the interaction of UK withholding tax and the drafting of a

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