The Finance Act 2015 introduced an exemption from a borrower’s obligation to withhold tax from interest payments arising on qualifying private placements. It was introduced to stimulate and grow the private placements market in the UK in order to unlock a new source of financing for mid-sized borrowers. Following a consultation period, the Qualifying Private Placement Regulations 2015 were made on 9 December 2015 and the exemption is set to enter into force on 1 January 2016.

THE CURRENT POSITION -

The UK imposes a 20% withholding on payments of interest by UK incorporated companies to foreign entities on loans and debt securities where the loan or debt is intended to last more than a year. Lenders resident in jurisdictions that have entered into a double tax treaty with the UK that reduces withholding tax to zero may generally apply to HMRC for zero withholding, either by submitting an application for formal tax treaty clearance or via the double tax treaty passport system.