On 1 September HMRC introduced a Double Taxation Treaty Passport Scheme to speed up the provision of treaty relief on UK loan interest payments by UK companies to lenders in other treaty countries. At the moment, interest can only be paid gross with the permission of HMRC, and that requires a claim certified by the tax authority in the lender’s country of residence. That tends to take a while.
Overseas companies can now apply for passport holder status which is expected to be granted within 30 days. The passport status will last for five years (unless it is withdrawn of course) and it can be renewed. It effectively authorises the borrower to pay interest gross or at the treaty rate of withholding tax.
Not only will it help with interest payments, but notification by the passport holder enables UK corporate borrowers to enter into loans confident that interest payments will attract exemption from withholding tax either in full, or at the treaty rate.
Further details of the passport scheme are available on request.