The Double Taxation Treaty Passport (DTTP) scheme lets an overseas lender be recognised once by HMRC as resident in a treaty country, so that each UK borrower only has to file a short notification (form DTTP2) to get a direction to pay interest at the treaty rate. The lender applies on form DTTP1 and the passport lasts five years. Until the direction is issued the borrower must normally keep deducting basic rate income tax, unless it filed DTTP2 online and received HMRC’s acknowledgement before paying.
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What problem does the passport scheme solve?
Section 874 of the Income Tax Act 2007 makes a company, and anyone paying a person whose usual place of abode is outside the UK, deduct income tax at the basic rate from yearly interest arising in the UK. For 2026 to 2027 the basic rate is 20%. Most UK treaties reduce or remove UK tax on interest, but relief is not automatic: the payer may only reduce the deduction once HMRC has issued a direction under regulation 2 of the Double Taxation Relief (Taxes on Income) (General) Regulations 1970 (SI 1970/488). A direction tells the payer either not to deduct tax, not to deduct more than a stated rate, or to deduct at a stated rate.
The traditional route is a certified claim, where the lender completes the relevant DT form for every loan and has its own tax authority certify its residence each time. HMRC’s terms and conditions (paragraph DTTP30000) describe the passport scheme as an administrative simplification and an alternative to that route, which remains open. Our guide to UK withholding tax on interest and royalties explains when the duty to deduct applies in the first place.
Which lenders can hold a passport?
The GOV.UK guidance says a company or concern can apply if it, or its head office, is resident in a country with a UK double taxation treaty. It expressly includes US limited liability companies and US corporations that pass income through to their shareholders for federal tax purposes. The terms and conditions add detail:
- Companies. Any overseas company, or concern treated as a company by its country of residence, can apply. Each group company needs its own passport; there are no group passports (DTTP30110).
- Branches. Where HMRC treats a branch as indistinguishable from its head office, the head office’s treaty governs relief, so a loan made by the branch can be passported if it would qualify when made by the head office (DTTP30120).
- Partnerships and other transparent entities. These can join only if every ultimate beneficial owner of the income is entitled to the same benefits under the same treaty. An overseas partnership must have all partners resident in the same jurisdiction and nominate one partner to deal with HMRC (DTTP30130).
- Sovereign wealth funds and pension funds. These can join if the ultimate beneficial owner is entitled to the same treaty benefits. Pension fund trustees can apply and should supply a copy of the trust deed (DTTP30140).
- Syndicates. A syndicate cannot itself hold a passport, but passport holders lending as members of a syndicate outside the Syndicated Loan Scheme can use their own passports (DTTP30160).
Since 6 April 2017 the scheme has been open to all UK borrowers with a duty to deduct, including partnerships, individuals and charities, not only companies (DTTP30010).
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How does a lender apply and renew?
The lender applies on form DTTP1. It must obtain a certificate of residence from its own tax authority, issued within the last 12 months (DTTP30200). If HMRC accepts the application it writes to the lender, issues a unique passport reference number and adds the lender to a public register showing its name, reference number and country of residence. A lender that does not want to be named on the register can use certified claims instead (DTTP30300).
A passport normally lasts five calendar years. HMRC no longer sends renewal reminders. The lender must send a renewal request within three months of the expiry date and say whether there have been material changes; if there have been none it is renewed for a further five years without fresh certification of residence, although HMRC may ask for one. If no renewal is received by the expiry date, passport status is withdrawn.
Holding a passport is not a blanket entitlement. A passport holder should only use the scheme for loans that meet every condition of the treaty, such as being subject to tax at home, any remittance condition and beneficial ownership of the interest where the treaty requires it (DTTP30400).
What does the UK borrower have to do?
The lender gives the borrower its passport number and the treaty rate it claims. The borrower checks the register and notifies HMRC on form DTTP2, which can be filed online or printed and posted. HMRC asks borrowers to do this as soon as possible once the loan arrangement is entered into. Entering into a loan with a passport holder does not by itself allow a reduced deduction (DTTP30600).
HMRC then checks that the treaty conditions are met and, if they are, sends the borrower a direction stating the rate and the period it covers (DTTP30630). Where a borrower has many lenders and debt trades frequently, HMRC will consider a monthly consolidated notification, known as DTTP2A, with a schedule of passport holders and their rates (DTTP30160).
A company that still has to deduct reports the tax on form CT61 for the quarter in which it pays the interest. The return and the tax are due within 14 days after the end of that return period.
Can the borrower pay at the treaty rate before the direction arrives?
Only in one situation. Under DTTP30610, a borrower that files DTTP2 online and receives HMRC’s acknowledgement may provisionally withhold at the treaty rate before the formal direction is issued. Once issued, the direction is backdated to the date the successful DTTP2 was submitted (DTTP30640).
If the borrower does not send DTTP2 before the first interest payment and no direction is in place when a payment is made, it must deduct at the basic rate. The lender then has to reclaim that tax by a certified repayment claim on the DT company form, giving the borrower’s name, payment dates, gross amounts and tax deducted (DTTP30650). A borrower that never notifies HMRC must deduct at the basic rate regardless of the lender’s passport, and HMRC may ask for tax and interest. A borrower that applies the wrong rate must make corrective payments.
How does it work in a simple case?
Illustration only. UK Co borrows from an overseas bank that holds a passport. Interest is £50,000 a quarter and the treaty rate on interest is nil.
| Scenario | Deduction from each £50,000 payment | What follows |
|---|---|---|
| DTTP2 filed online and acknowledged before the first payment | Nil, provisionally | Direction issued and backdated to the DTTP2 submission date |
| DTTP2 filed late, no direction yet at the first payment | £10,000 (20%) | UK Co reports on CT61; the bank reclaims on the DT company form; later payments nil once the direction applies |
| No DTTP2 filed | £10,000 (20%) on every payment | If UK Co paid gross instead, HMRC can pursue it for the tax and interest |
What happens when the loan or the lender changes?
A passport holder must tell HMRC about material changes to its own circumstances, such as a change of name, address, business form after a merger or country of residence, and for non corporate lenders a change in members or their residence (DTTP30410). Failure can lead to suspension or withdrawal.
Changes to a loan under a direction, including contractual extensions and sales or assignments of the loan, can also be dealt with by a new DTTP2 where the existing or new lender holds a passport (DTTP30420). A passport holder that buys a loan on the secondary market can use the scheme in the normal way (DTTP30170). If a UK guarantor is called on to pay interest, HMRC treats the date the guarantee is called as the start of a new loan relationship for which a passport can be used (DTTP30180).
If a lender loses its passport, the borrower can keep relying on an existing direction unless HMRC issues a notice of cancellation. In connected party lending, though, the borrower may be liable to withhold if it knew, or could reasonably be expected to know, that the lender did not qualify (DTTP30810).
What are the common mistakes?
- Paying interest gross because the lender “has a passport”, without filing DTTP2. The passport only identifies the lender; relief at source needs the borrower’s notification and a direction.
- Filing DTTP2 on paper and assuming provisional relief. The early relief in DTTP30610 follows an online submission and HMRC’s acknowledgement.
- Letting a passport lapse. There are no reminders, and status is withdrawn if renewal is not received by the expiry date.
- Using the scheme where the lender is not the beneficial owner or is not subject to tax at home, when the treaty requires it.
- Using the scheme for qualifying private placements. HMRC says it is distinct from section 888A, under which no deduction is due at all (DTTP30900).
A lender without a passport, or an individual lender, uses the certified claim route instead; see how double tax treaties work and certificates of residence. Interest between connected parties also raises transfer pricing and corporate interest restriction questions that the passport does not answer.
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Related Accountapedia entries
- Double taxation relief for inheritance tax
- Double tax relief for companies
- Certificates of UK residence for treaty claims
- Verifying identity without a passport or driving licence
- Double entry bookkeeping explained
Sources
- legislation.gov.uk: Act 2007 c. 3, section 874
- GOV.UK: Income tax rates and allowances current and past
- legislation.gov.uk: SI 1970/488, regulation 2
- GOV.UK: Double taxation treaty passport scheme terms conditions and guidance
- GOV.UK: Double taxation treaty passport scheme
- GOV.UK: International tax application for a double taxation treaty passport dt
- legislation.gov.uk: Act 2007 c. 3, section 949
- GOV.UK: Corporation tax return of income tax on company payments ct61
- legislation.gov.uk: Act 2007 c. 3, section 888A
Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.