There is a general obligation on payers of UK source interest
payments to non-residents to deduct income tax and to account for
the tax to HM Revenue & Customs under ICTA88/S349(2)(c).
It may be possible that such payments of interest will fall
to be considered under domestic tax law as having a UK source, even
where both recipient and payer are resident outside the UK. Further
information on the definition of UK source is given at
INTM505020. The onus is on the payer
to decide whether tax is to be deducted, having regard to settled
case law principles and all the facts surrounding the loan.
Where the payer concludes that the interest is UK source, so
that it is under an obligation to deduct tax, the recipient may be
entitled to make a claim for repayment of tax or application for
relief at source if there is a double taxation agreement between
the UK and the recipient's country of residence. Further details of
the procedures for claims and applications and of the supporting
information to be supplied are to be found at
INTM506000. See CNR DT Guidance Note
No.1 07/02 - Applications for relief at source on interest payments
where both recipient and payer are outside the UK. This Guidance
Note can be found on the
CNR
website.
