Double taxation treaty passport scheme: expanding the scope

A borrower which makes a payment of UK source interest to an overseas lender is required to withhold on account of UK income tax at the rate of 20% (ITA 2007 s 874(2)) unless an exemption applies. The overseas lender will often be resident in a jurisdiction with which the UK has a double taxation treaty and which entitles it to a full or partial exemption from UK withholding tax.

 

In the case of withholding tax imposed in a number of European jurisdictions an overseas lender is often able to self-certify its entitlement to treaty benefits which means that the zero or reduced rate applies immediately upon entering into the loan. However with respect to UK withholding tax...