Other terminology: Rate of withholding tax
Where UK residents opted not to disclose the details of their assets to HMRC in tax years following when the agreement came into effect, the paying agents would have deducted an appropriate amount of withholding tax from their future income and gains. This effect of this deduction will have meant that, in the absence of an election under Article 23, the taxpayer would have ceased to be liable to UK tax on the relevant income and gains.
The rate of withholding tax is based on the appropriate UK rate for the period and type of taxable income. There is a slight reduction to adjust for the fact that the tax will be received slightly earlier by HMRC under this process than it would have been had it been paid through the usual Income Tax Self Assessment (ITSA) procedure.