TAX NEWS - June 2010

UK Tax: Changes to treaty relief process for interest payments

HMRC have confirmed that they will be introducing the new Double Tax Treaty Passport Scheme with effect from 1 September 2010. The pre-registration period opened on 1 June and we recommend lenders submit their applications as early as possible to ensure passport status is received by 1 September.

Under the new system, treaty clearance for interest payments will be based on the status of the lender, which will only normally be considered every five years (or possibly longer in due course) and not at the time of the making of each individual loan, as at present. Once lenders have been certified under the 'passport scheme', the parties to a loan into the UK will follow a notification system to obtain confirmation that interest payments will be able to be paid at treaty rates.

The greatest benefits from this change will come where the lender makes multiple loans to a UK entity or entities in respect of which multiple applications would be required under the current system, including situations where there is a group treasury company. However, for all loans where treaty benefits need to be claimed it should result in a more efficient process.