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HMRC internal manual

International Manual

EU Interest and Royalties Directive: What happens if a claim is refused or an exemption notice cancelled

If the Commissioners of Revenue & Customs considers that they have grounds for refusing to issue an exemption notice, the Large Business Service Double Tax Treaty team will write to the claimant company within three months of receipt of the claim, giving the reasons for the refusal.

If it appears to the Board that the necessary conditions for exemption are no longer met, or it appears that anti-avoidance rules (ITTOIA05/S765) apply, the Double Tax Treaty team may cancel the exemption notice by writing to both the paying company and the non-UK person who requested the issue of the exemption authority.

The beneficial owner of the interest or royalties may appeal to the First-tier Tax Tribunal against a refusal to issue an exemption notice or the cancellation of an exemption notice. They must do so to the Commissioners within 30 days of the date of notification of the refusal.

The grounds of the appeal are that the conditions of ITTOIA05/S758 have been satisfied or that the anti-avoidance rules do not apply. If the First-tier Tax Tribunal allows the appeal, it will, as appropriate, direct HMRC to issue the exemption notice within 14 days of its decision, or direct that any cancellation was ineffective.

The decision of the First-tier Tax Tribunal is final. That decision of course, only concerns the granting of the exemption notice, not the payer’s or the claimant’s tax affairs more widely.