The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
When companies make certain payments to specified types of recipient, they are required to deduct income tax at source and pay it to HMRC. In doing so, they act as a collector of tax. The liability to the tax is borne by the recipient of the related income who should usually be able to claim relief for the tax suffered at source.
The main instances where companies may have to deduct income tax at source are:
payments of interest which are not to companies
payments of interest overseas
payments of interest to partnerships (unless all the partners / members are companies), and
ITA 2007, ss 874, 946
Tax is deducted at the rate of 20% in respect of interest and royalties.
A common example of the payment of interest by a company to an individual, is where a director has made a loan to a company. A commercial rate of interest may be paid by the company on the director’s loan account, as one way of extracting funds for the director. The interest is an allowable deduction for the company, provided the loan money is used within the company’s business, and not for an ‘unallowable purpose’.
Companies do not suffer income tax on amounts received from other UK companies and, likewise, they do not withhold tax on payments to other UK companies.
However, if companies receive patent royalties from in
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
IntroductionUK tax must be withheld on UK payments including:•interest•royalties•rental incomeWithholding tax may be reduced under double tax treaties (DTT) or European directives, both of which may be subject to making a formal claim.This guidance note outlines the rules for UK withholding tax, and
The basic rule is that all benefits provided to an employee by reason of their employment are taxable unless there is a specific exemption or other rule that means they are not chargeable to tax.ExemptionsThe main exemptions for employee benefits are in ITEPA 2003, ss 227–326B (Pt 4).Below is an
The rent-a-room scheme was introduced in the early 1990s to encourage homeowners to take in lodgers.Fundamentally, the rent-a-room scheme is a relief which means that the rent received by an individual from a lodger (up to a prescribed limit) can be exempt from income tax. If the gross rents are
This guidance note provides an overview of what conditions need to be met before a business is entitled to treat VAT incurred as input tax. This note should be read in conjunction with the other notes in the ‘Claiming input tax’ subtopic. For a flowchart outlining the procedure for claiming input
To view our latest tax guidance content, sign in to Tolley Guidance or register for a free trial.