Most double taxation agreements entered into by the UK contain
an interest article which reduces or eliminates the source
country's taxing right. The reduced or zero rates may be given by
way of relief at source or by repayment of tax deducted. Neither is
automatic: the recipient must apply for relief to be given at
source or claim repayment.
Where the relief is given at source, authorisation will be
issued to the payer, once the recipient's application has been
agreed, to operate either
There is more information on the way in which double tax
agreements may apply to reduce or eliminate withholding tax on
cross-border interest at
INTM506010.
There is more information on the procedures for applying for
relief at source, or claiming repayment of tax deducted in excess
of the agreement rate, at
INTM506020 and
INTM506030.
Until clearance is given, no payer is entitled to assume that
the treaty will apply so that it need not withhold tax. If interest
is paid gross without clearance, then an assessment may be made on
the company that failed to withhold tax to recover the lost tax and
interest and, in some cases, penalties may be applicable. See
INTM505130 for more information on
accounting for tax deducted and for the position where interest has
been paid gross without clearance.
