UK-Estonia double taxation, interest in Estonia for UK resident

jamesd

Am I correct in reading the pages on the UK-Estonia double taxation agreement that a UK domiciled and resident individual using peer to peer lending to individual residents of Estonia in Estonia via an Estonian peer to peer lending business is subject to UK income tax and not Estonian income tax? The "via" part arranges but does not make the loans, acting as a broker and administrator, not lender, just like Zopa here.

Basis seems to be "Interest is deemed to arise in the country in which the payer is resident"

For anyone else contemplating this, do note that a UK tax return will be required for foreign interest receipt, even if you don't currently need to file one and your affairs are otherwise PAYE. Though if anyone knows of a threshold below which that isn't strictly required at HMRC discretion I'd appreciate knowing about it so I can ask for an exercise of that discretion for the 2012-13 tax year. Current forecast is a couple of hundred Pounds of interest in this tax year and I'm already well used to telling HMRC about other, non-foreign, P2P gross interest receipts.

madgagoo

Currently, HMRC are putting clients into SA for any foreign interest.

In previous years we'd get away with a couple of hundred pounds informally but their rules say 'any foreign interest' and they are enforcing that. For example I had a client recently who had £7 of foreign interest, HMRC insisted on issuing a return, even though their total income was under their personal allowance.

So, to summarise, if you receive any interest from Estonia - expect to have to complete a return!