New Withholding Tax Exemption for Private Placements in the UK

by Dechert LLP

Interest paid by UK companies is generally subject to withholding tax at 20%. Although various exemptions apply, most notably in respect of interest payments to banks and other UK companies, and in respect of securities listed on a recognised stock exchange (so called “quoted eurobonds”), such exemptions are often of limited use in a private placement context, particularly where investors are based outside the UK.

In his 2014 Autumn Statement, the Chancellor recognised that a specific withholding tax exemption for private placements would help to develop the private placement market in the UK and expand the available sources of financing for mid-sized corporate borrowers in the UK. Following a detailed consultation, implementing regulations were made in December 2015 and took effect on 1 January 2016. The new private placement exemption allows a UK corporate borrower to pay interest gross if certain conditions are satisfied. 

The Exemption Conditions

In order to qualify for the private placement exemption from withholding tax each of the following conditions must be met:

  1. There must be a “relevant security”, which broadly means a security or a loan relationship in respect of which a company is a debtor, which is not listed on a recognized stock exchange.
  2. The term of the security must not exceed 50 years.
  3. At the time entered into, the security must have a minimum value of £10 million.
  4. The security must be entered into by the corporate borrower for genuine commercial reasons and not as part of a tax advantage scheme.
  5. The corporate borrower must reasonably believe that it is not a connected person in respect of each investor/lender.
  6. The corporate borrower must hold a "creditor certificate" for each investor/lender. A creditor certificate is a written statement in which a confirmation is made by or on behalf of the investor/lender that:
    • the investor/lender is a resident of a country that has a double tax treaty with the UK which includes a non-discrimination article. A non-discrimination article is a treaty provision which prevents a state from subjecting the nationals of another state to any tax or connected requirements which is more burdensome than those that apply to its own citizens; and
    • the investor/lender is beneficially entitled to the interest on the relevant security for genuine commercial reasons, and not as part of a tax advantage scheme. 

Practical Considerations

Where the exemption conditions are satisfied, the corporate borrower may now pay interest free of withholding. There should be no need to seek advance approval from HMRC and no requirement to go through a double tax treaty clearance procedure. The rules apply to qualifying private placements whether entered into before, on or after 1 January 2016.

Corporate borrowers seeking to rely on the private placement exemption should ensure that they hold (or are entitled to require from investors) a valid creditor certificate. Facility documentation should be drafted to ensure that borrowers are able to obtain the necessary certificate and, from a borrower perspective, to exclude the obligation to gross up interest payments where the lender has failed to provide such a certificate.

While the new exemption will simplify administration in all qualifying circumstances for both borrowers and non-UK institutional investors (whether banks, treaty entitled investment funds or other treaty entitled investors), it will be particularly beneficial to such investors/lenders who do not hold a treaty passport under the DTTP Scheme and who wish to receive interest gross without the need to go through a formal treaty relief application. In addition, the new relief will be particularly relevant to investors/lenders into the UK who are based in jurisdictions with which the UK has a tax treaty which does not provide for a zero treaty rate of withholding on interest.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dechert LLP | Attorney Advertising

Written by:

Dechert LLP

Dechert LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.