Withholding tax Definition

GLOSSARY

/wɪðˈhəʊldɪŋ/ /taks/

Published by a UU��ֱ�� Pensions expert

What does Withholding tax mean?

A tax deducted from foreign investment income. The tax can often be claimed back, either at source or via a reclaim process.

Exemptions and reliefs from the WHT obligation on interest are available provided the relevant conditions are satisfied.

Pensions

A tax deducted from foreign investment income. The tax can often be claimed back, either at source or via a reclaim process.

View the related checklists about Withholding tax

Issues with franchising in an overseas territory—checklist

Issues with franchising in an overseas territory—checklist This Checklist sets out the issues for a franchisor to consider when preparing to operate the franchise in an overseas territory. The advance of technology has helped facilitate the rise of a global economy. This has led to the creation of opportunities for companies to trade outside of their domestic markets and exploit developing territories. However, a number of issues arise when a franchisor is preparing to operate in an overseas territory some of which are detailed below. PESTLE analysis A franchisor may wish to carry out a political, economic, environmental, sociological, technological, legal and environmental factors (PESTLE) analysis in relation to a new territory. The information obtained from the analysis can be used as a guide to strategic decision making when considering international franchising. Below is a list of legal and non-legal issues that might arise with international franchising. Political • There may be increased political or legislative risks that should be taken into consideration by businesses before they commence operations in...

GAAR guidance: examples of non-abusive transactions—checklist

GAAR guidance: examples of non-abusive transactions—checklist The GAAR guidance aims to help interpret and apply the general anti-abuse rule (GAAR). This is why the GAAR guidance includes in Part D various examples to illustrate the types of arrangements HMRC considers should escape the GAAR and those which it considers should be caught by the GAAR. The current version of the GAAR guidance, as well as previous versions of the guidance, are available online (see: GAAR guidance). Part D of the GAAR guidance (which is dated 11 September 2020) contains the majority of the illustrative examples, but some are found in other parts of the guidance too. For ease of reference, the table in this Checklist: • pulls together • in one place • a list of the arrangements: ◦ referred to in any part of the GAAR guidance ◦ in respect of which HMRC has indicated it would not pursue counteraction under the GAAR (although note that much of the legislation underlying the examples has changed since the examples were...

Tax treatment of pensions—an introduction

Broadly speaking, tax applies to UK registered pension schemes in three different areas:•tax treatment of member and employer contributions (including refunds of member contributions)•tax treatment of the assets (including investment returns on those assets) held by the scheme, and•tax treatment of benefits paid out of the schemeWhere an individual is a member of more than one registered scheme, contributions to/benefits from each scheme are aggregated for the purpose of determining that individual's tax liability.This Practice Note covers registered private sector pension schemes. Public sector pension schemes are largely dealt with by separate legislation. Tax treatment is similar but not always identical to that applying to registered private pension schemes.The pensions tax relief systemThe current pensions tax relief system can be described as 'Exempt-Exempt-Taxed':•Exempt—in broad terms, pension contributions by individuals and their employers are exempt from income tax and corporation tax (subject to the annual allowance)•Exempt—investment returns made from pension contributions are broadly exempt from income tax and capital gains tax•Taxed—pension benefits in payments are generally subject to income tax (subject...

Withholding tax—basic principles for banking lawyers

Withholding tax—basic principles for banking lawyers In many jurisdictions, including the United Kingdom, borrowers are, in certain circumstances, obliged to withhold a proportion of the interest payable to the lender and pay the withheld amount to the tax authorities. This Practice Note provides an overview of when UK withholding tax is applicable to lending and lists the key exemptions. For more detailed information on how withholding tax is dealt with in facility agreements, see Practice Note: Tax considerations on a loan agreement—the tax gross up clause and Reviewing a loan with a view to alleviating UK withholding tax risk—checklist. What is withholding tax? Withholding tax is a method of collecting tax at source from the person who makes the payment (as opposed to collecting it from the recipient of the payment). Withholding tax is an efficient way for tax authorities such as His Majesty's Revenue and Customs (HMRC) to collect tax as the person making the payment has the administrative burden of: • withholding the appropriate amount of income tax...

Discover our 306 Practice Notes on Withholding tax

Tax and taxation definition

Tax or Taxation

Clause—tax gross up—commercial agreements

1 Withholding and grossing up 1.1 All sums payable under this [Agreement] by or on behalf of any party (for the purposes of this clause 1, the payer) to another (the payee) shall be paid free and clear of all deductions or withholdings save only as may be required by law. 1.2 If any deduction or withholding is required by law to be made from any payment under this [Agreement], the payer shall, except in respect of interest for late payment under [clause [insert clause number] of] this [Agreement], pay the payee[, at the same time as making the payment in question,] such additional...

Dive into our 31 Precedents related to Withholding tax

Does a construction company that provides subcontractors with a van (including all fuel and running costs) for use on their construction projects have any CIS obligations in relation to the provision of the van?

Does a construction company that provides subcontractors with a van (including all fuel and running costs) for use on their construction projects have any CIS obligations in relation to the provision of the van? The construction industry scheme (CIS) was devised to limit the amount of tax lost as a result of subcontractors in the construction industry under-declaring or failing to notify their chargeability to UK tax. For further information, see Practice Note: The construction industry scheme—when does it apply? Scope of CIS The obligation to deduct tax imposed by the CIS rules applies only to a contract payment. A ‘contract payment' is defined as: ‘… any payment which is made under a construction contract and is so made by the contractor (see section 57(3)) to— (a) the sub-contractor, (b) a person nominated by the sub-contractor or the contractor, or (c) a person nominated by a person who is a sub-contractor under another such contract relating to all or any of the construction operations.’ Even if...

In circumstances where a UK resident individual is paying interest to a non-UK resident individual but withholding tax has not been deducted, is it possible for the non-UK resident recipient to pick up the tax bill?

In circumstances where a UK resident individual is paying interest to a non-UK resident individual but withholding tax has not been deducted, is it possible for the non-UK resident recipient to pick up the tax bill? We have assumed that you are referring to a situation where the UK resident individual has paid interest from which income tax should have been withheld under section 874(1)(d) and (2) of the Income Tax Act 2007 (ITA 2007), but did not do so. The provisions relating to the collection of income tax in respect of a payment from which a sum must be deducted by a person other than a company is dealt with by ITA 2007, Pt 15, Ch 16. ITA 2007, s 963 deals with payments where deduction is required under ITA 2007, s 874(2). It requires (subsection 2) that the person who is required to deduct the sum ‘must deliver to an officer of Revenue and Customs an account of the payment without delay’. In SAIM9170, HMRC confirms that...

See the 13 Q&As about Withholding tax

Tax weekly highlights—28 November 2024

This week's edition of Tax weekly highlights includes: (1) the second reading of Finance Bill 2025, (2) confirmation of the date of the second reading of the NICs (Secondary Class 1 Contributions) Bill, (3) the Upper Tribunal (UT) decision rejecting an application for permanent anonymity in HMRC v The Taxpayer, and (4) the publication of a HMRC Spotlight on Managed Service Companies.

Autumn Budget 2024—What did we learn from the government’s UK Corporate Tax Roadmap?

Tax analysis: Naomi Lawton, Knowledge Counsel at A&O Shearman examines the government’s Corporate Tax Roadmap as announced at the Autumn Budget 2024 including its practical implications.

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