Alongside Finance Bill 2017, the Government has published its response to last year’s consultation on the operation of HMRC’s Double Taxation Treaty Passport (DTTP) scheme. As previously announced at the time of the 2017 Spring Budget, the DTTP scheme’s Terms and Conditions and guidance will be updated and published on 06 April 2017, but the direction of travel is now clear from the responses.
To summarise the key points on who will, from 06 April 2017, be able to access the DTTP scheme:
- The DTTP scheme will be available to all UK borrowers that have an obligation to deduct withholding tax (including UK partnerships, individuals and charities) where they are facing passported lenders.
- Non-UK partnership lenders will be permitted to obtain passports where all partners are resident in the same jurisdiction and entitled to the same treaty benefits. Qualifying partnerships must appoint a “designated” or “nominated” partner, responsible for making the initial application, corresponding with HMRC and notifying any relevant changes.
- Sovereign investors and pension funds who are relying on a double tax treaty will be admitted into the scheme on the same grounds as other lenders, ie where the beneficial owners are entitled to the same treaty benefits under the same treaty.
- No extension of the DTTP scheme to sovereign lenders who are relying on immunity, on the basis that no administrative simplification is achieved.
In addition the following administrative matters were confirmed:
- treaty passport duration will remain at five years
- HMRC is considering changes to the renewal process (eg digitisation), but this will be a later phase
- HMRC will consider what (if any) additional information can be included on the passport register while maintaining taxpayer and commercial confidentiality, and
- there are no plans to introduce additional sanctions for misuse of the DTTP scheme.
Lenders and Borrowers will need to await the publication of the updated Terms and Conditions and guidance on 06 April 2017 for clarification in some areas. For example, it is not entirely clear from the responses to what extent non-UK non-corporate borrowers paying UK source interest will be able to use the scheme (as things stand, in practice non-UK corporate borrowers can use the scheme, but even this could be stated more clearly). However, it is clear that the DTTP scheme will be broadened considerably, which is a very welcome development.
For details of the new Terms and Conditions and updated guidance, see "New Treaty Passport Terms and Conditions".
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.