Foreign interest

By Tolley
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The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Foreign interest
  • The tax status of the individual
  • The source of the interest
  • Foreign currency
  • Foreign tax deducted
  • EU Savings Directive (up to 31 December 2015)
  • Agreement with Switzerland (up to 31 December 2016)
  • Common reporting standard
  • Unremittable income
  • Completing the Tax Return
  • Undisclosed offshore interest
  • Source ceasing

This guidance note explains how foreign interest is taxed in the UK and how it should be reported to HMRC. It covers the treatment of bank interest, interest on loans to persons overseas, and interest on most overseas loan stock (ie interest on bonds issued by foreign governments or by companies abroad).

Some payments from offshore funds are also treated as interest and these are discussed in the Offshore funds guidance note.

For insurance products, see the Offshore bonds and other foreign policies guidance note. This note does not cover the rate of tax which is applied to the interest if it is taxable in the UK. This is covered in the Taxation of savings income guidance note.

The UK territories of the Isle of Man, Jersey and Guernsey are classed as overseas for tax purposes.

The tax status of the individual

The UK tax position of overseas interest depends on the tax status of the individual.

Taxpayers who are resident and domiciled in the UK are taxable on their worldwide income on the arising basis. In the case of interest, this means that it is taxable when it is credited to the foreign bank account. These terms are discussed in detail in the Residence ― overview and Domicile guidance notes.

ITTOIA 2005, s 368; Girvan v Orange Personal Communications Services Ltd [1998] STC 567 (subscription sensitive)

Those individuals who are non-domiciled may instead use the remittance basis of assessment. This means that the interest is only taxed when it is remitted (brought) to the UK. If these individuals choose not to use the remittance basis, they are taxed in the same way as those who are UK domiciled. For the remittance basis generally, see the Remittance basis ― overview guidance note.

ITTOIA 2005, s 832

Prior to the 2013/14 tax year, if the

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