Withholding tax on payments of interest

Produced by a Tolley Corporation Tax expert

Corporation Tax

Guidance

This guidance note explains the main scenarios where UK companies (other than financial institutions, etc) must withhold tax at source on payments of interest and how this is dealt with in practice. For more general information on the obligation to withhold tax in the UK from interest, royalties, etc, see the Withholding tax guidance note.

Obligation to withhold income tax from certain payments

When UK companies, or partnerships of which a company is a member, make certain types of payment, they are required to deduct income tax (at the basic rate) at source and pay it over to HMRC. In doing so they act as a collector of the UK tax that may be due from the recipient of the related income. The recipient will usually be able to claim relief against its UK or overseas tax liability for the tax suffered at source, as long as they are not based in a tax haven.

Income tax is only deductible from payments of yearly interest with a UK source when paid.

Yearly interest has no

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