Personal tax planning in 2021/22

All change on withholding taxes

With the UK finally cutting its ties with the EU at the end of the transition period, withholding taxes are now back for consideration on dividend, interest and royalty payments both ways between the UK and its ex-EU partners.

Effectively, the EU parent subsidiary directive and the EU interest and royalties directive are history for us in the UK and we all have to revert to the bilateral tax treaties which the UK has with each of those countries to establish the correct position.

• With 18 of the Member States, withholding taxes are now in force from 1 January 2021 on at least some of these either outward or inward payments. Beware, the rate one way is not necessarily the same as the rate the other way.
• With the other nine Member States, withholding taxes can be 0% across the board but clients may need prior approval from the local tax authority before they can be applied.

Here in the UK, payments of interest or royalties need to be reported within 14 days from the end of each return period (usually quarterly but there are five ‘quarters’ for companies with year ends not on 31 March, 30 June, 30 September or 31 December) with the correct withholding tax paid over at the same time.

Failure to comply leads to interest and penalties which none of our clients like.

We can provide assistance with such UK procedures. Please contact Head of Tax Cormac Marum

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