Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Withholding tax definition

What does Withholding tax mean? Withholding tax is tax deducted at source from certain payments—commonly dividends, interest and royalties—often where the payee is non‑resident. It is a descriptive term used across tax practice; specific obligations and rates are set by statute and treaty (for the UK, principally the Income Tax Act 2007; for Ireland, the Taxes Consolidation Act 1997) and by double taxation agreements. United Kingdom (England & Wales, Scotland and Northern Ireland): withholding typically applies at 20% to interest and royalties, subject to domestic exemptions and treaty relief. The UK generally does not impose withholding on dividends, save for certain distributions (for example, REIT property...

UK withholding tax on royalties and IP payments: statutory scope (ITA 2007 ss 900–917A), UK source/PE, reliefs and DTTs, anti-avoidance (PPT, treaty shopping, DPT), Pillar Two STTR

Published by a LexisNexis Tax expert

Practice notes

This Practice Note

summarises the UK provisions that oblige payers to withhold, and pay over to HMRC, an amount equal to UK basic rate income tax (currently 20%) from consideration for the use of, or the right to use, Intellectual property (IP), including royalties and similar consideration payable under comparable contractual arrangements
sets out the notions of IP and UK source, which underpin the requirement to deduct income tax at the basic rate from IP-related payments, in practice across common scenarios
describes the reliefs that can be claimed from UK Withholding Tax on IP-related payments; and
examines the anti-abuse measures that may curtail the application of double tax treaty (DTT) relief to the relevant IP-related payment, including: the principal purpose test; and the anti-treaty shopping rule for connected parties

This Practice Note also briefly touches on the subject to tax rule. In this Practice Note, IP-related payment is the label used for royalties and other amounts paid for the use of, or for the right to use, IP. References in this Practice Note to the obligation to deduct (and account to HMRC for) an amount in respect of UK income tax from IP-related payments employ the term withholding tax even...

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Web page updated on 21/05/2026

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