UK withholding tax failures: new HMRC guidance for borrowers

The guidance sets out a new formal, more prescribed process for obtaining relief. Provided that the relevant conditions are met, borrowers will not have to account for UK withholding tax in respect of their withholding tax failures (although statutory interest and potentially penalties will apply).

HMRC has sought to standardise the process for disclosing withholding tax failures and making relief claims. This should bring efficiencies for HMRC when considering and processing such claims, given that the previous concessionary practice left it open to advisers to submit claims to HMRC using their own ‘house’ approaches.

The new process replaces the previous concessionary practice and applies to disclosures made from 2 November 2026. It involves the completion of a new HMRC form (with 65 questions) and there is a prescribed list of information and evidence that has to be provided in order for the claim to be valid.

We will need to see how HMRC will approach this in practice to understand if the new process brings unexpected evidentiary, administrative and/or cost burdens. Given the backlog of historic disclosures falling within the previous concessionary practice (which remain paused), and the opportunity for HMRC to create a better system going forward, we hope and expect that HMRC will work with stakeholders to ensure that the new process is fine-tuned to operate in an efficient and workable manner for all.

HMRC are allowing historic disclosures made under the previous concessionary practice and which are currently the subject of the temporary pause to utilise the new process. This could potentially unlock such claims. However, borrowers and their advisers will need to carefully consider whether it is worth utilising the new process for historic disclosures, particularly given that certain periods to which those disclosures relate may be time barred under the new process. HMRC is still considering how to deal with disclosures made before 2 November 2026 which are within the pause on processing.

It will be necessary to consider the drafting that should be included in loan agreements to enable compliance with the evidentiary requirements set out in the new claim form (including confirmations regarding beneficial ownership and tax residency certificates to support treaty entitlement) and whether, in practice, this will be possible given current market practice and the reluctance of lenders to provide more contractual comfort than is strictly necessary.

Borrowers and their advisers will now need to fully digest and stress test the new guidance. It will also be necessary to review HMRC’s (not yet published) guidance regarding its approach to dealing with historic disclosures which remain paused before we can really understand the new landscape for dealing with UK withholding tax failures and the impact on the wider loan market and associated contractual risk allocation. The date for publication of this guidance has not yet been confirmed.

Further information

For further information on HMRC’s new process, including the implications for historic disclosures, evidentiary requirements and loan documentation, please contact any of the members of Eversheds Sutherland’s tax team set out below.