Income Tax Bill

House of Commons

Session 2006 - 07
Internet Publications
Other Bills before Parliament

Income Tax Bill

Income Tax Bill
Part 14 — Deduction of income tax at source
Chapter 2 — Deduction by deposit-takers and building societies
403

Other investments which are not relevant investments
796
General client account deposits
(1)
An investment is not a relevant investment if it is a general client account
deposit.
(2)
An investment is a general client account deposit for the purposes of this
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section if—
(a)
it is a deposit held by a deposit-taker or building society in a client
account, and
(b)
provision made under any enactment requires the person whose
account it is to make payments representing interest to some or all of
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the clients for whom, or on whose account, that person received the
sums deposited in the account.
(3)
But an investment is not a general client account deposit if the account in which
it is held is identified by the deposit-taker or building society as one in which
sums are held only for one or more particular clients of the person whose
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account it is.
797
Qualifying uncertificated eligible debt security units
An investment is not a relevant investment if it is a deposit in respect of which
a deposit-taker or building society has issued a qualifying uncertificated
eligible debt security unit (see section 920).
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798
Qualifying certificates of deposit
An investment is not a relevant investment if it is a deposit in respect of which
a deposit-taker or building society has issued a qualifying certificate of deposit
(see section 919).
799
Qualifying time deposits
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(1)
An investment is not a relevant investment if it is a qualifying time deposit.
(2)
An investment is a qualifying time deposit for the purposes of this section if—
(a)
it is a deposit consisting of a loan of at least £50,000,
(b)
the terms of the deposit require its repayment at a specified time within
5 years beginning with the date on which it is made,
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(c)
those terms do not make provision for the transfer of the right to
repayment, and
(d)
those terms prevent partial withdrawals of, or additions to, the deposit.
(3)
If a deposit is denominated in a foreign currency, subsection (2)(a) has effect as
if it referred to an amount which is at least the equivalent in that currency of
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£50,000 at the time the deposit is made.
800
Lloyd’s premium trust funds
(1)
An investment is not a relevant investment if it forms part of a premium trust
fund of an underwriting or former underwriting member of Lloyd’s.

Income Tax Bill
Part 14 — Deduction of income tax at source
Chapter 2 — Deduction by deposit-takers and building societies
404

(2)
In this section “premium trust fund” has the meaning given in section 184 of
FA 1993.
801
Investments held outside the United Kingdom
(1)
An investment with a deposit-taker is not a relevant investment if—
(a)
the deposit-taker is UK resident for income tax purposes or corporation
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tax purposes, and
(b)
the investment is held at a branch of the deposit-taker situated outside
the United Kingdom.
(2)
An investment with a deposit-taker is not a relevant investment if—
(a)
the deposit-taker is non-UK resident for income tax purposes or
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corporation tax purposes, and
(b)
the investment is not held at a branch of the deposit-taker situated in
the United Kingdom.
(3)
An investment with a building society is not a relevant investment if it is held
at a branch of the building society situated outside the United Kingdom.
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(4)
For the purposes of this section an investment is held at a branch of a deposit-
taker or building society if the investment is recorded in its books as a liability
of that branch.
802
Sale and repurchase of securities
(1)
An investment is not a relevant investment if it is a loan which is treated as
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made to a building society by virtue of section 607 (treatment of price
differences under repos).
(2)
An investment is not a relevant investment if it is an amount of cash which is—
(a)
received by a building society in connection with a repo in
circumstances where section 607 applies, and
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(b)
required as a result of a variation in the value of the securities in respect
of which the repo is made as security for performance by the parties to
the repo of their obligations under it.
(3)
In this section “repo” has the same meaning as in Part 11 (see section 569).
803
Other investments
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(1)
An investment with a deposit-taker is not a relevant investment if—
(a)
it is a loan made by a deposit-taker in the ordinary course of its business
or activities,
(b)
it is a debt on a security which is listed on a recognised stock exchange,
or
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(c)
it is a debt on a debenture issued by the deposit-taker (see section 956).
(2)
An investment with a building society is not a relevant investment if—
(a)
it is a loan made by a bank (as defined in section 925), or
(b)
it is a security (including a share) issued by a building society which is
listed, or capable of being listed, on a recognised stock exchange.
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Income Tax Bill
Part 14 — Deduction of income tax at source
Chapter 2 — Deduction by deposit-takers and building societies
405

Supplementary
804
Power to make regulations to give effect to Chapter
(1)
The Commissioners for Her Majesty’s Revenue and Customs may by
regulations make provision—
(a)
about the giving of information by deposit-takers, building societies
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and appropriate persons,
(b)
about the inspection of deposit-takers’ and building societies’ books,
documents and other records by officers of Revenue and Customs, and
(c)
generally for giving effect to this Chapter.
(2)
Regulations under this section may contain incidental, supplemental,
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consequential and transitional provision and savings.
(3)
In this section “appropriate person” means a person who, in relation to an
investment, falls within any of the following—
(a)
section 791(5),
(b)
section 792(5),
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(c)
section 793(4), or
(d)
section 794(5).
805
Power to make orders amending Chapter
(1)
The Treasury may by order amend this Chapter for the purposes of providing
that investments of a kind specified in the order are, or are not, relevant
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investments.
(2)
An order under this section which amends this Chapter in its application to
deposit-takers may do so—
(a)
in relation to all deposit-takers, or
(b)
in relation to such deposit-takers or classes of deposit-taker as the order
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may specify.
(3)
An order under this section may contain incidental, supplemental,
consequential and transitional provision and savings.
(4)
An order under this section may not amend section 785 (power to make
regulations disapplying section 784).
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(5)
An order under this section may not amend section 803(2)(b) for the purpose
of providing that securities of the kind mentioned in that provision are relevant
investments.
806
Discretionary or accumulation settlements
(1)
A settlement is a discretionary or accumulation settlement for the purposes of
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this Chapter if any income arising to the trustees would (unless treated as
income of the settlor) be to any extent income within subsection (2) for the tax
year in which it arises.
(2)
Income is within this subsection so far as it is—
(a)
accumulated or discretionary income as defined in section 480 (other
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than income arising under a trust established for charitable purposes

Income Tax Bill
Part 14 — Deduction of income tax at source
Chapter 3 — Deduction from certain payments of yearly interest
406

only or an unauthorised unit trust in relation to which section 504
applies), or
(b)
an amount of a type set out in section 482 (unless the trust is a unit trust
scheme or the amount is income arising under a trust established for
charitable purposes only or is excluded by section 481(5)).
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(3)
A person is a beneficiary under a discretionary or accumulation settlement for
the purposes of this Chapter if—
(a)
the person is an actual or potential beneficiary under the settlement,
and
(b)
condition A or B is met in relation to the person.
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(4)
Condition A is that the person is, or will or may become, entitled under the
settlement to receive some or all of any income under the settlement.
(5)
Condition B is that some or all of any income under the settlement may be paid
to or used for the benefit of the person in the exercise of a discretion conferred
under the settlement.
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(6)
The references in subsections (4) and (5) to any income under the settlement
include a reference to any capital under the settlement so far as it represents
amounts originally received by the trustees as income.
Chapter 3
Deduction from certain payments of yearly interest
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Duty to deduct sums representing income tax
807
Duty to deduct from certain payments of yearly interest
(1)
This section applies if a payment of yearly interest arising in the United
Kingdom is made—
(a)
by a company,
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(b)
by a local authority,
(c)
by or on behalf of a partnership of which a company is a member, or
(d)
by any person to another person whose usual place of abode is outside
the United Kingdom.
(2)
The person by or through whom the payment is made must, on making the
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payment, deduct from it a sum representing income tax on it at the savings rate
in force for the tax year in which it is made.
(3)
But see—
(a)
sections 808 to 821 as to circumstances in which the duty to deduct a
sum under this section is disapplied, and
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(b)
Chapter 11 (payments between companies etc) for a further exception
from the duty to deduct under this section.
(4)
See also regulations made under section 17(3) of F(No.2)A 2005 (authorised
investment funds)—
(a)
for provision treating certain amounts shown in the distribution
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accounts of authorised investment funds as payments of yearly
interest, and

Income Tax Bill
Part 14 — Deduction of income tax at source
Chapter 3 — Deduction from certain payments of yearly interest
407

(b)
for exceptions from the duty to deduct under this section which would
otherwise apply to such payments.
(5)
For the purposes of subsection (1) the following are to be treated as payments
of yearly interest—
(a)
a payment of interest made by a registered industrial and provident
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society in respect of any mortgage, loan, loan stock or deposit, and
(b)
any interest, dividend, bonus or other sum payable to a shareholder of
such a society by reference to the amount of the shareholder’s holding
in the share capital of the society.
(6)
For the purposes of subsection (1)—
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(a)
a payment made by a company in a fiduciary or representative capacity
is not to be treated as a payment made by the company, and
(b)
a payment made by a local authority in a fiduciary or representative
capacity is not to be treated as a payment made by the local authority.
(7)
For provision about the collection of income tax in respect of a payment from
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which a sum must be deducted under this section—
(a)
see Chapter 15 if the person making the payment is a UK resident
company, and
(b)
otherwise see Chapter 16.
Exceptions from duty to deduct
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808
Interest paid by building societies
The duty to deduct a sum representing income tax under section 807 does not
apply to a payment of interest made by a building society.
809
Interest paid by deposit-takers
(1)
The duty to deduct a sum representing income tax under section 807 does not
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apply to a payment of interest in respect of which a deposit-taker has a duty to
deduct under section 784.
(2)
The duty to deduct a sum representing income tax under section 807 does not
apply to a payment in respect of which a deposit-taker would have a duty to
deduct under section 784 but for—
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(a)
regulations under section 785, or
(b)
any of sections 791 to 794.
810
UK public revenue dividends
The duty to deduct a sum representing income tax under section 807 does not
apply to a payment of interest in respect of a UK public revenue dividend.
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811
Interest paid by banks
(1)
The duty to deduct a sum representing income tax under section 807 does not
apply to a payment of interest made by a bank if that payment is made in the
ordinary course of its business.
(2)
Section 925 (meaning of “bank”) applies for the purposes of this section.
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