Withholding tax on overseas interest – is a resolution finally in sight?

HMRC has proposed simplifying withholding tax administration for UK companies paying interest to overseas lenders by removing the requirement for formal treaty clearance. Under the proposed changes, UK borrowers could apply reduced withholding tax rates under double tax treaties where they reasonably believe the conditions are met. While this would reduce administrative burdens and cashflow challenges, it would also place greater responsibility on borrowers to assess eligibility and maintain supporting documentation, with potential penalties for errors. Complex lending arrangements may still require additional guidance or optional clearance from HMRC. However, the proposals do not address historic withholding tax errors or the ongoing uncertainty surrounding HMRC’s paused concession, leaving affected businesses exposed to potential tax liabilities and commercial risks.

Originally Published by Crowe UK on 8 October 2026