UK and International Tax news

DTTP Scheme Update

Thursday 6th June 2013

HMRC has recently announced changes to the Double Taxation Treaty Passport (DTTP) Scheme for overseas corporate lenders with effect from April 2013, in order to improve the customer experience of its users and enhance the scheme’s effectiveness. The changes are based on operational lessons learnt since the Scheme’s inception and representations made by taxpayers.

There are two significant changes:

  • The removal of the requirement for the UK borrower company to send a completed form DTTP2 notification to HMRC within 30 working days of the start of the borrower’s loan relationship with the lender. Instead, the borrower should send the form to HMRC at least 30 working days before the first interest payment is due on the loan.
  • HMRC will now in certain circumstances consider issuing a treaty passport to a US disregarded LLC or US S-Corporation.

The main points of the DTTP Scheme for corporate lenders are:

  • An overseas corporate lender in a country with which the UK has a double taxation treaty that includes an interest or income from a debt-claims Article, may apply for a ‘Treaty Passport’ [TP] from HMRC using form DTTP1.
  • If a TP is granted by HMRC, the passport holder is entered onto a publicly available register with a unique DTTP number.
  • Prospective UK resident corporate borrowers should check HMRC’s online register (Register of Double Taxation Passport holders) to verify the lender’s TP holder status.
  • If the UK borrower enters into a loan agreement with a lender who is registered as a TP holder, the lender will notify them of their passport holder status and reference number.
  • The UK borrower should then notify HMRC of the making of a ‘passported’ loan  using form DTTP2.
  • HMRC will use the DTTP2 notification details to issue a ‘Direction’ to the UK borrower to pay the interest with income tax deducted at the rate set out in the relevant double taxation treaty.
  • For non-TP situations, the normal ‘certified double taxation claim’ remains the default method for applying for double taxation treaty relief.
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