New Withholding Tax Exemption for Private Placements in the UK

January 07, 2016

Interest paid by UK companies is generally subject to withholding tax at 20%. Although various exemptions apply, most notably in respect of interest payments to banks and other UK companies, and in respect of securities listed on a recognised stock exchange (so called “quoted eurobonds”), such exemptions are often of limited use in a private placement context, particularly where investors are based outside the UK.

In his 2014 Autumn Statement, the Chancellor recognised that a specific withholding tax exemption for private placements would help to develop the private placement market in the UK and expand the available sources of financing for mid-sized corporate borrowers in the UK. Following a detailed consultation, implementing regulations were made in December 2015 and took effect on 1 January 2016. The new private placement exemption allows a UK corporate borrower to pay interest gross if certain conditions are satisfied.

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