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Tax on interest, royalties and dividends in a no-deal Brexit

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HMRC has issued a guide to how payments of interest, royalties and dividends between UK and EU companies might change if the UK leaves the EU without a deal.

In the event of no deal, which as things currently stand would take effect from 11pm on 12 April, the EU interest and royalties directive would cease to apply to UK companies and some EU companies may be required to deduct tax from payments, subject to relief under double tax agreements.

Payments of interest and royalties by UK companies will continue to be exempt by virtue of ITTOIA 2005 ss 757–767, which allows an exemption for payments made by companies with permanent establishments in the UK to associated companies in the EU.

The EU parent-subsidiary directive would also cease to apply to UK companies and some EU companies may start to deduct tax from dividends, subject to the terms of double tax agreements.

As UK law does not impose an obligation to deduct tax from dividends, UK companies may continue to pay dividends gross.


Issue: 1437
Categories: News