Withholding tax on interest – does the “Tinkerman” strike?
Wed 08 Mar 2017
Claudio Ranieri (the ex-Leicester City FC manager, for those who have never heard of him) has often been referred to as the “Tinkerman” because of the changes he would constantly make to some of the football teams he managed. Will Philip Hammond end up with the same nickname? Or will he maintain a consistency in the tax regime that taxpayers need in order to best manage their affairs.
One area of tax administration that has been a great success (albeit not in the area of tax revenue raising) is that of the “Double Tax Treaty Passport” (“DTTP”). The DTTP scheme was introduced some years ago as a means of simplifying the process for obtaining relief under a Double Tax Agreement for withholding tax on interest. Previous to the scheme, every time a non-UK corporate lender made a loan to a UK corporate borrower, a form would need to be completed which would then need to be signed by the tax authorities of the relevant overseas country. However once a DTTP is issued in favour of an overseas lender, any future loans made by that lender (during the period of the passport) will automatically benefit from reduced withholding tax (subject to certain other procedural requirements), even where the loan is to a different borrower.
The Government now intends to extend the scheme, so that the restriction of the scheme to corporate lenders and corporate UK borrowers will be removed and, from 6 April 2017, this will now apply to all types of overseas lenders and UK borrowers who are eligible for reduced withholding tax rates.
Further good news is that an exemption from the 20% withholding tax on interest payments is to be introduced in relation to debt traded on a multilateral trading facility. Such an exemption would apply irrespective of the terms of any applicable Double Tax Treaty. More detail will be given on 20 March 2017, on which date a consultation document is to be issued.
Does all of this make Philip Hammond the “Tinkerman”?
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