Double taxation treaty passport scheme extended
HMRC is to renew and extend the scope of the double taxation treaty passport (DTTP) scheme, which will now be available to all UK borrowers who are required to withhold income tax at the basic rate on certain loan interest payments to overseas lenders from 6 April 2017
The DTTP scheme is an administrative simplification designed to assist certain foreign lenders in accessing reduced withholding tax rates on interest that are available within the UK’s tax treaties with other territories. Prior to 6 April 2017 the scheme was restricted to overseas corporate lenders and UK corporate borrowers.
HMRC consulted on the changes last year, and received responses from accountancy firms, lawyers, tax advisers, sovereign wealth funds (SWF) and representative bodies. It has now issued amended guidance and terms and conditions for the scheme, which will commence for loans entered into on or after 6 April 2017.
The DTTP scheme is now available to all UK borrowers that have an obligation to deduct withholding tax, including UK partnerships, individuals and charities.
Transparent entities (including partnerships) will be admitted to the scheme as lenders where all of the constituent beneficial owners of the income are entitled to the same treaty benefits under the same treaty. In addition, SWFs and pension funds who are utilising withholding tax treaty rates will be admitted into the scheme as lenders.
The current scheme’s technical questions and contain guidance on syndicated loans, and this will continue to apply to the new scheme. HMRC will still require the submission of form DTTP2 for all loans wishing to make use of the DTTP scheme. This is to allow HMRC to ensure the integrity of the scheme and to fulfil its obligations to its treaty partners.
HMRC says form DTTP2A is specifically designed to facilitate the operation of syndicated loans within the DTTP scheme. It would not be appropriate to extend its use further.
Double Taxation Treaty Passport scheme review Consultation Response is here.
Double Taxation Treaty Passport Scheme terms and conditions and guidance is here.