United Kingdom
11 November 2026
On 11 November 2026, HMRC published updated guidance on paused UK interest withholding tax (WHT) disclosures. This supplements the guidance published on 2 November 2026 introducing a new claims process where tax has not been deducted and should have been. The updates are relevant for all payers of UK-source interest overseas where withholding tax has previously been underpaid.
HMRC have replaced their previous concessionary approach to failures to deduct UK withholding tax on interest paid to overseas lenders with a formal claims process (payer claim), effective from 2 November 2026. Updates to HMRC guidance issued on 11 November 2026 make clear that making a claim under the new process should not affect a person's ability to access any treatment HMRC may subsequently apply to cases impacted by the pause in processing, including any different late payment interest treatment afforded to such cases, which is a welcome clarification.
The revised guidance issued on 2 November represents a significant change in how failures to deduct income tax from payments of yearly interest to overseas lenders are resolved. Relief now depends on a valid claim that can be made by the payer (previously it was only a lender process) supported by evidence that the relevant treaty conditions are met, rather than an administrative concession. Where full treaty relief is available, the outcome may still be that only late payment interest (LPI) is payable, but reaching that outcome will now depend on a payer submitting a valid claim and demonstrating that the relevant treaty conditions are met.
The further guidance issued on 11 November clarifies the interaction between payer claims under this new process and requests for a paused disclosure to be considered under the previous LPI concession. The pause on processing WHT disclosures has not been lifted.
Under the previous concession, HMRC accepted that LPI would run to the earlier of the date a direction was granted or the date of disclosure. The new payer claim process is clear that LPI will run to the claim date such that it raised a question for paused cases: would submitting a claim fix the LPI end date at the date of submission of the claim and mean the original disclosure date was disregarded, thereby increasing the amount of interest payable? Following continued engagement, HMRC have now confirmed through their updated guidance that making a payer claim will not affect access to any treatment they may apply to paused disclosures submitted while the previous concession was in effect.
Per the updates to the guidance, HMRC will process claims relating to previously disclosed cases, but HMRC will delay the calculation and collection of associated late payment interest pending a decision on treatment of cases impacted by the pause. However, this payer claim process provides a route to resolve a paused disclosure more quickly where commercial circumstances require settlement. For full discharge of the obligation, this is likely to require agreement that LPI will run to the earlier of the date the WHT is paid and the date a valid claim is made (i.e. not the date of the original disclosure), so will require consideration on a case-by-case basis.
A review of the evidential requirements to submit a valid claim, in particular where engagement with third-party lenders may be required, is advisable in the near term.
For claims outside of the 4-year time limit, there remains a need to review available routes to resolution and HMRC note that a mutual agreement procedure under the relevant treaty may provide such a route.
A payer of UK-source yearly interest must determine whether UK tax is required to be deducted at source. Where no exception applies and the lender is resident overseas, advance clearance from HMRC may allow payment without deduction, or at a reduced rate, under the relevant Double Taxation Convention. Clearance must be obtained before the first interest payment. Without it, a payment made without the required deduction gives rise to a failure to deduct tax.
Any identified failure to comply with the requirement to deduct tax from payments of yearly interest should be disclosed to HMRC.
HMRC withdrew their previous concessionary treatment effective from 2 November 2026.
Under the concession as it applied, HMRC would, in certain circumstances, set aside their right to assess the payer for the underlying tax and collect only the associated LPI. To access this concessionary treatment specific conditions were required to be met, including that a valid payment direction notice was prevailing, such that it could not apply, for example, where loans had been repaid or lenders liquidated.
The withdrawal applies to all disclosures of failures to deduct tax on payments of yearly interest received by HMRC on or after 2 November 2026, including those relating to payments made before that date.
The new claims process applies from 2 November 2026 where UK-source yearly interest has been paid to an overseas lender without deduction of the correct amount of withholding tax. The UK payer may make a claim, with information and supporting evidence required from the lender.
HMRC have published guidance at INTM413232, INTM413234, and INTM413236 on claims following a failure to deduct. INTM413232 addresses new disclosures. Separate Guidance sets out how to make a claim and includes the relevant form.
The process applies where the payer failed to deduct income tax when required, or deducted too little, and the lender is the beneficial owner of the interest and resident in a jurisdiction whose double taxation agreement with the UK limits the UK's taxing rights over that interest.
The guidance does not apply where a statutory exemption removed the requirement to deduct, or where payments were made in accordance with a valid HMRC direction. Where the correct amount of tax was deducted, the existing process continues to apply: treaty relief should be claimed by the lender.
The payer must provide details of the interest payments and relevant treaty provisions, evidence of the lender's residence, and evidence or a declaration on beneficial ownership by the lender of the interest. The claim also requires declarations regarding the failure to deduct and the completeness and accuracy of the claim.
Claims must be made outside a return using HMRC's prescribed claim form. The deadline is generally four years after the end of the year of assessment in which the obligation to deduct and the resulting income tax liability arose. For payments made in the 2022/2023 tax year, the claim deadline is therefore 5 April 2027.
HMRC note that a mutual agreement procedure under the relevant treaty may provide a route to relief for years outside the claim period.
Where HMRC are satisfied that treaty relief is due, they will discharge the appropriate amount of unpaid income tax or repay the appropriate amount of tax already paid. Late payment interest will remain payable from the original due date until the earlier of the date a valid claim is submitted and the date the tax is paid (subject to resolution of the paused disclosure matter set out below).
HMRC may give effect to a claim and subsequently open an enquiry. An enquiry may consider the lender's residence and beneficial ownership, compliance with other treaty requirements, and whether any tax was previously deducted or paid. Inaccurate claims may result in penalties under Schedule 24 FA 2007.
INTM413232 sets out the process for new disclosures of failures to deduct. HMRC are still considering their approach to disclosures made before 2 November 2026 that remain within the processing pause.
Following continued engagement with HMRC, further guidance at INTM413205 was published on 11 November 2026. This confirms that submitting a payer claim does not affect access to any different LPI treatment that HMRC may apply to paused disclosures.
A payer claim can protect the ability to obtain relief within the relevant time limits. The disclosure position will not be finalised until HMRC clarify their approach to paused disclosures and the associated LPI.
The standard time limit permits claims for the 2022-23 tax year onwards, provided claims for 2022-23 are made by 5 April 2027.
Relevant context for these developments is that on 13 July 2026, HMRC launched a consultation on options to simplify the administration of relief from withholding tax on payments of UK-source interest to overseas lenders. The consultation closed on 7 September 2026. Deloitte submitted detailed responses, recognising that a range of scenarios require specific consideration. The key proposals included:
HMRC are continuing to consider the consultation responses. The existing process for obtaining advance directions for interest payments, and the requirement to notify HMRC of changes to existing directions, remain in place.
Where cross-border loans are in place, these should be reviewed to confirm whether relevant documentation is in place to enable payments to be made without deduction of tax. Where any issues are identified these should be disclosed to HMRC promptly, alongside submitting the new claims form with required evidence to ensure the claim form is valid.
The new claims process applies to disclosures made on or after 2 November 2026. Where interest was paid in the 2022-23 tax year without the necessary tax deducted, a claim must therefore be made by 5 April 2027. LPI will continue to run until a valid claim is made (subject to the conclusion of the paused disclosures).
Where a disclosure has previously been submitted, consideration should be given to the benefits of submitting a claim on a case-by-case basis. Given HMRC’s clarification that submitting a claim will not affect access to any different LPI treatment that HMRC may apply to paused disclosures, this can protect the reclaim position without jeopardising any alternative treatment HMRC may conclude on finalisation of their review of paused disclosures.
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Paul Dennis Annis Lampard Morgan Harries |
Gemma Marshall Lauren Parascandolo Alexander Bessell |