Frequently asked questions

General

UK investors

General

1.1 When will the scheme begin?
The scheme comes into effect on 1 July 2005. This is the date on which the regulations and the Directive also come into force. Notices have been published in the London, Edinburgh and Belfast Gazettes to confirm this date.

1.2 Which are the prescribed territories?
UK paying agents are required to report details of savings income they pay to individuals resident, and certain types of entities established, in particular territories. They are referred to as prescribed territories because they are prescribed in regulations.

  • the other 24 EU Member States
  • Aruba, the British Virgin Islands, Gibraltar, Guernsey, the Isle of Man, Jersey, Montserrat and the Netherlands Antilles

The regulations will be amended as necessary to prescribe further territories.

1.3 Where do I go for help with the scheme?
Detailed guidance is available. HMRC will also provide assistance to paying agents. Depending on the level of support you need, this could include seminars, help visits or telephone advice. If you wish to register for advice, please contact HMRC on 0151 472 6129.

1.4 Where can I get hold of a copy of the Directive?
The Directive was published in the Official Journal of the European Union on 26 June 2003.

UK investors

2.1 Which territories will be withholding tax?
The following territories will be withholding tax during a transitional period:

  • Austria, Belgium and Luxembourg
  • The British Virgin Islands, Gibraltar, Guernsey, the Isle of Man, Jersey, the Netherlands Antilles and the Turks & Caicos Islands
  • Andorra, Liechtenstein, Monaco, San Marino and Switzerland

The other territories involved - i.e. the remaining EU Member States and the territories which have signed agreements with the UK - will be reporting information.

2.2 I have a bank account in Austria/Jersey etc. - will I have tax withheld?
Paying agents in these territories will be withholding tax from savings income they pay. You will be able to have the income paid without deduction of withholding tax under the Directive. Paragraph 8 of "Issues for UK investors" outlines the 2 options that territories can use to allow you to do this. Each territory will decide which of the 2 options it will adopt.

2.3 I have a bank account in a country that will exchange information - what does this mean for me?
The Directive will have no impact on anyone who properly declares all their income. In future HMRC will receive information about savings income you receive from abroad. This will be supplied by the tax authority of the country in which the person who pays you (or who collects the income for you) is based. The information will be compared with what you tell HMRC.

2.4 I have a bank account overseas. Should I tell HMRC about interest I receive?
This income is taxable in the UK, provided you are resident here for tax purposes and are domiciled here. See booklet IR20 (PDF 640K) for more information on how to find out your residence and domicile status and the implications for foreign income. If you have not declared such interest then you should contact your tax office.

2.5 Will the overseas bank with which I have an account want to see my passport?
The overseas bank may need to update or add to the information it holds about you in order to report to its tax authority, particularly if you opened the account after 1 January 2004. It will let you know if you need to do anything.

2.6 I already have tax withheld on my overseas bank account - will this change?
No. Any tax withheld under the Directive is in addition to any tax withheld under the domestic laws of the country where the account is held. Paragraph 8 of "Issues for UK investors" explains how you can ensure that no tax is withheld under the Directive or how to have the tax set off or repaid.

2.7 How much tax will be withheld under the Directive?
Under the Directive, 15% tax will be withheld during the first three years after it takes effect, 20% during the next three years, and 35% after that.

2.8 I am a non-taxpayer - can I reclaim the tax withheld?
Paragraph 8 of "Issues for UK investors" explains how you can ensure that no tax is withheld under the Directive. But if it is, you can set it off against other tax you have to pay, or reclaim it (though any other foreign tax withheld can, as now, only be set off against any UK tax liability and cannot be repaid).

Example

Suppose you receive interest of 100 from which tax of 15 is withheld by a paying agent in Luxembourg.

  • If you have no UK tax liability, the Inland Revenue will repay to you the 15 Luxembourg tax.
  • If you have a UK tax liability of 10, 10 of the Luxembourg tax will be credited against that liability, reducing it to nil, and the excess Luxembourg tax of 5 will be repaid to you.
  • If you have a UK tax liability of 20, all the Luxembourg tax will be credited against that liability, reducing it to 5.
  • If you have a UK tax liability of 40, all the Luxembourg tax will be credited against that liability, reducing it to 25.

2.9 How will conventional tax withheld (at source) and tax withheld under the Directive (by paying agents) be treated?
Credit will be given first for any conventional tax withheld at source under existing rules before giving credit for tax withheld by paying agents under the Directive. This ensures that you get the maximum amount of credit.

Example

Suppose you receive interest of 100 from which tax of 10 is withheld in the country of source and from which tax of 15 is also withheld under the Directive by a paying agent in Luxembourg.

  • If you have no UK tax liability, the Inland Revenue will repay to you the 15 Luxembourg tax. As now, there is no provision for repaying any of the tax withheld in the country of source.
  • If you have a UK tax liability of 10, all the 10 tax withheld in the country of source will be credited against that liability, reducing it to nil, and the excess Luxembourg tax of 15 will be repaid to you.
  • If you have a UK tax liability of 20, all the 10 tax withheld in the country of source and 10 of the Luxembourg tax will be credited against that liability, reducing it to nil. The Inland Revenue will repay to you the remaining 5 Luxembourg tax.
  • If you have a UK tax liability of 40, all the 10 tax withheld in the country of source and all the 15 Luxembourg tax will be credited against that liability, reducing it to 15.

2.10 I receive rent from property abroad. Will that income be reportable under the scheme?
No, rent is not reportable savings income.

2.11 I am a UK resident and I have a UK bank account - am I affected?
No. If you are paid savings income by someone in the UK, and you pay tax in the UK, then you will not be affected by the Directive.

2.12 I am resident but not domiciled in the UK. Am I within the scope of the Directive if I do not remit savings income to the UK from abroad?

The Directive makes no mention of domicile or remittance. If you are resident in the UK and you receive savings income from a territory covered by the Directive (or a related agreement) then details of the payment should be reported to the UK, or it should be subject to withholding tax. You may apply for a certificate from HMRC for the income to be paid gross. Alternatively, if tax is withheld, you may claim credit for the tax on your Self Assessment return.

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