Withholding tax on interest payment

Main provisions can be found in Income Tax Act 2007 section 874 (2)

Any interest paid needs TDS (tax deducted at source).

Rate of deduction – Basic rate : presently 20%

Corporate exemption – If interest paid to a UK tax resident company. No TDS required.

DTAA: Where DTAA exemption exists. HMRC prior permission required to pay gross.

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