Contributed By Winston & Strawn London LLP
Payments of interest with a UK source to a recipient outside the charge-to-UK corporation tax are generally subject to a UK withholding tax (current rate 20%). Application for an exemption from this requirement may be made in certain circumstances, including interest paid to non-UK residents where authority is obtained from HMRC for the interest to be paid gross (or at a reduced rate) under the terms of a double-tax treaty, or is paid under certain listed securities. HMRC operates a fast-track double-taxation treaty passport scheme for overseas corporate lenders which has recently been extended to certain transparent entities, sovereign wealth funds and pension funds (subject to various conditions).
Principal, discounts and premiums are not generally subject to UK deduction of tax.