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HMRC internal manual

International Manual

Double Taxation applications and claims: Applicants/claimants: Overseas Collecting Societies: What is the Block Exemption Scheme?

The Block Exemption Scheme is offered only to Overseas Collecting Societies that are broadly similar to their UK equivalent society. The scheme is not available to individuals, companies or partnerships/LLCs who must apply for Double Taxation relief in the normal way.

The Block Exemption Scheme allows for Overseas Collecting Societies to apply for DT treaty relief at source from UK income tax on the royalties collected by their UK counterparts (INTM338010) on behalf of all the members of each of the Overseas Collecting Societies.

To be admitted into the scheme the Overseas Collecting Society must provide various undertakings. The following paragraphs explain the reasons why the undertakings are required.

When making a DT application on behalf of its members, the Overseas Collecting Society actually signs the declaration on the DT application form to the effect that the Overseas Collecting Society is itself the beneficial owner of the royalties paid. This is obviously a contradiction as it is in fact their members who are beneficially entitled to the royalties paid to the society. See Undertaking 1, INTM338030.

The DT application is made under the terms of the DTA the UK has with the Overseas Collecting Society’s country of residence. It is possible that

  • some members of the Overseas Collecting Society are resident in a different country,
  • or they are acting as agents/trustees on behalf of the true beneficial owner of the royalties.

Consequently the scheme requires that these members must be identified. This is achieved by the Overseas Collecting Society sending the UK Collecting Society a list of any of its members who are either not resident in the same country as that in which the Society operates or are not themselves the beneficial owner of the right to the royalties. See Undertaking 2 INTM338030.

Those members who are resident in a different country to that in which the Society operates may make a specific application under the terms of the Double Taxation Agreement between the UK and that member’s country of residence. If that member’s claim is successful HMRC may authorise the UK Collecting Society to exclude that member’s name from the list of members of the Overseas Collecting Society not entitled to relief.

To allow the scheme to operate the Overseas Collecting Society must agree that where payments of royalties are due to members who do not qualify for DT relief, UK income tax will be deducted from future payments. See Undertaking 3 INTM338030.

This is achieved by the UK Collecting Society deducting UK income tax from the amount paid to non qualifying members as shown on the list provided by the Overseas Collecting Society. The UK Collecting Society must also provide an undertaking that the UK income tax deducted will be accounted for to its own Inspector of Taxes. See INTM338040