INTM367015 - EU Directive: Interest & Royalties paid between Associated Companies - claims and applications by non-residents

Further background

What procedures will CAR Residency follow?

What is meant by “such supporting information as the source state may reasonably ask for”?

What line will CAR Residency take?

How will we know the date of the three-month deadline?

Even if the 4450 is not returned by the date of expiry of the three-month deadline a decision must still be taken.

What happens if we miss the deadline?

What happens if tax has already been deducted and repayment is claimed?

What procedures will CAR Residency follow? {#}

As with claims under the terms of double taxation treaties, we liaise with the tax office for the UK payer of the income (the 4450 procedure – see INTM506010) before we make a decision.

The Directive contains an important condition that impacts upon the way in which we must deal with these applications. Where an application for relief is made we only have three months in which to make a decision about allowing relief from UK tax – see also Regulation 3(2) SI2004/No2622.

The date by which a decision must be taken is calculated by taking the date that the fully completed claim form is received together with “such supporting information as the source state may reasonably ask for “.

See also INTM367020

What is meant by “such supporting information as the source state may reasonably ask for”? {#}

As with claims that are made under DTAs we ask a series of standard questions. The claim form also asks for a copy of the contract to be supplied. Additionally, we ask for a certification of tax residence to be completed by the tax authority of the other country. In most cases this information should be sufficient to allow us to reach a decision about the availability of exemption from UK tax.

What line will CAR Residency take? {#}

When a claim form EU Interest & Royalties is received here that is complete (it is certified by the tax authority of the other Member State, all of the questions on the form have been answered unambiguously and the supporting information that is requested on the form has been supplied) the clock starts to tick.

If you decide to ask our claimant for further information you need to consider if a Self-Assessment enquiry is required – see INTM331000.

Unless you decide to ask for more information we have three months in which to make a decision.

If it is necessary to ask for clarification of “reasonable” information, or if the answers to any of the questions on the claim form are unclear, we have three months from the date this additional information is provided before a decision must be taken.

How will we know the date of the three-month deadline? {#}

Because of the requirement to make decisions within three months we need to be kept informed of the progress of any enquiries by the Area Office/LBS/BTG.

Where a claim is made on form EU Interest & Royalties our requests for reports on form 4450 will have to be accompanied by a covering memo that explains the reasons for the request and states the deadline by which a decision must be taken.

Even if the 4450 is not returned by the date of expiry of the three-month deadline a decision must still be taken. {#}

We must also be certain that when a file is waiting for attention here that the deadline for a decision will not pass. For that reason it is important to know what is the last date for a decision to be taken and for these cases to be given the appropriate amount of priority.

What happens if we miss the deadline? {#}

If a decision is not taken within the three month deadline then the UK company is entitled to make payments without deduction of tax and there is nothing that can be done to rectify matters if we subsequently decide that exemption from UK tax is not available.

What happens if tax has already been deducted and repayment is claimed? {#}

If a payment of interest and/or royalties has been made (after the date on which the Directive came into force) and tax has been deducted, a qualifying non-resident person may claim repayment. The claim is made on form EU Interest & Royalties (see INTM367005).

CAR Residency will deal with such a claim in exactly the same way as a request for the issue of an exemption notice for interest payments (see INTM367020). However, as provided for by Article 1(16) of the Directive, the time limit by which a decision must be taken on a claim to repayment of tax is one year from the date on which the claim and “reasonable” supporting information is received by CAR Residency.