Do I need to deduct full-rate UK tax when making royalty or loan interest payments to a recipient in a country where there is a double taxation agreement in force?
A. Yes. You must deduct tax until the overseas recipient has made a successful claim for relief under the double taxation agreement. For copies of claim forms consult HMRC Residency at PO Box 46, Fitz Roy House, Nottingham NG2 1BD (telephone 0845 070 0040 (+ 44 0151 210 2222 if calling from outside the UK)).
A. Yes, except that where a company has a reasonable belief that the non-resident is entitled, at the time the payment is made, to relief from UK tax on those royalties under a double tax treaty, it may pay the royalty gross, or at a reduced rate of deduction at source, in line with the terms of the relevant treaty. In other cases, you must deduct tax until the overseas recipient has made a successful claim for relief under the double taxation agreement. For copies of claim forms consult HMRC Residency at PO Box 38, Ferrers House, Nottingham NG2 1BB (telephone 0845 070 0040 (+ 44 0151 210 2222 if calling from outside the UK)).
