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 3 — Deduction from certain payments of yearly interest
408

812
Interest paid on advances from banks
(1)
The duty to deduct a sum representing income tax under section 807 does not
apply to a payment of interest on an advance from a bank if, at the time when
the payment is made, the person beneficially entitled to the interest is within
the charge to corporation tax as respects the interest.
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(2)
Section 925 (meaning of “bank”) applies for the purposes of this section.
(3)
Subsection (1) applies to the European Investment Bank as if the words from
“if” to the end were omitted.
(4)
An order under subsection (2)(e) of section 925 designating an international
organisation as a bank may provide that subsection (1) applies to the
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organisation with the modification mentioned in subsection (3).
813
Interest paid on advances from building societies
The duty to deduct a sum representing income tax under section 807 does not
apply to a payment of interest on an advance from a building society.
814
National Savings Bank interest
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The duty to deduct a sum representing income tax under section 807 does not
apply to a payment of interest on deposits with the National Savings Bank.
815
Quoted Eurobond interest
The duty to deduct a sum representing income tax under section 807 does not
apply to a payment of interest on a quoted Eurobond (see section 921).
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816
Interest on loan to buy life annuity
The duty to deduct a sum representing income tax under section 807 does not
apply to a payment of interest to which section 369 of ICTA applies (interest on
loan to buy life annuity payable under deduction of tax).
817
Relevant foreign income
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(1)
The duty to deduct a sum representing income tax under section 807 does not
apply to a payment of interest which is chargeable to income tax as relevant
foreign income.
(2)
For the meaning of “relevant foreign income”, see section 923.
818
Authorised persons dealing in financial instruments
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(1)
The duty to deduct a sum representing income tax under section 807 does not
apply to a payment of interest made by a person authorised for the purposes
of FISMA 2000 if—
(a)
the person’s business consists wholly or mainly of dealing in financial
instruments as principal, and
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(b)
the payment is made by that person in the ordinary course of that
business.
(2)
For the meaning of “financial instrument”, see section 917.

Income Tax Bill
Part 14 — Deduction of income tax at source
Chapter 3 — Deduction from certain payments of yearly interest
409

819
Interest paid by recognised clearing houses etc
(1)
The duty to deduct a sum representing income tax under section 807 does not
apply to a payment of interest made by a recognised clearing house (“RCH”)
or recognised investment exchange (“RIE”) if—
(a)
the RCH or RIE is carrying on business as the provider of a central
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counterparty clearing service, and
(b)
the interest is paid in the ordinary course of that business, on margin or
other collateral deposited with it by users of the service.
(2)
The duty to deduct a sum representing income tax under section 807 does not
apply to interest treated by virtue of section 607 (treatment of price differences
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under repos) as paid by an RCH or RIE in respect of contracts made by it as the
provider of a central counterparty clearing service.
(3)
In this section—
“central counterparty clearing service” means the service provided by an
RCH or RIE to the parties to a transaction where there are contracts
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between each of the parties and the RCH or RIE (in place of, or as an
alternative to, a contract directly between the parties), and
“recognised clearing house” and “recognised investment exchange” have
the same meaning as in FISMA 2000 (see section 285 of that Act).
820
Industrial and provident society payments
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(1)
The duty to deduct a sum representing income tax under section 807 does not
apply to either of the following payments if they are payable to a person whose
usual place of abode is in the United Kingdom—
(a)
a payment of interest made by a registered industrial and provident
society in respect of any mortgage, loan, loan stock or deposit, or
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(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.
(2)
A registered industrial and provident society must, within 3 months after the
end of each of its accounting periods, deliver to an officer of Revenue and
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Customs a return containing the information mentioned in subsection (3).
(3)
That information is—
(a)
the name and place of residence of every person to whom the society
has, as a result of this section, made one or more payments in the period
amounting in total to at least £15 without deducting a sum (or sums)
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representing income tax, and
(b)
the amount so paid in the period to each of those persons.
(4)
See section 486(7) of ICTA as to the consequences of not making a return as
required by subsection (2).
(5)
In this Chapter “registered industrial and provident society” means a society
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registered or treated as registered under the Industrial and Provident Societies
Act 1965 (c. 12) or the Industrial and Provident Societies Act (Northern Ireland)
1969 (c.24 (N.I.)).
(6)
For the purposes of this section crediting interest (or amounts treated as
interest) counts as paying it.
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Income Tax Bill
Part 14 — Deduction of income tax at source
Chapter 4 — Deduction from payments in respect of building society securities
410

821
Statutory interest
The duty to deduct a sum representing income tax under section 807 does not
apply to a payment of interest made by virtue of the contractual term implied
by section 1(1) of the Late Payment of Commercial Debts (Interest) Act 1998
(c. 20) (statutory interest).
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Chapter 4
Deduction from payments in respect of building society securities
822
Payments in respect of building society securities
(1)
This section applies to any payment made in a tax year if—
(a)
it is a payment of a dividend or interest in respect of a security issued
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by a building society, and
(b)
conditions A and B are met in relation to the security.
(2)
Condition A is that the security was listed or capable of being listed on a
recognised stock exchange at the time the dividend or interest became payable.
(3)
Condition B is that the security is not—
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(a)
a qualifying certificate of deposit (see section 919),
(b)
a qualifying uncertificated eligible debt security unit (see section 920),
or
(c)
a quoted Eurobond (see section 921).
(4)
The person by or through whom the payment is made must, on making it,
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deduct from it a sum representing income tax on it at the savings rate in force
for the tax year.
(5)
For provision about the collection of income tax in respect of a payment from
which a sum must be deducted under this section—
(a)
see Chapter 15 if the person making the payment is a UK resident
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company, and
(b)
otherwise see Chapter 16.
(6)
See also Chapter 11 (payments between companies) for an exception from the
duty to deduct sums representing income tax under this section.
(7)
In this section—
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“dividend” includes any distribution (whether or not described as a
dividend), and
“security” includes a share (and, in particular, a permanent interest
bearing share as defined in section 117 of TCGA 1992).

Income Tax Bill
Part 14 — Deduction of income tax at source
Chapter 5 — Deduction from payments of UK public revenue dividends
411

Chapter 5
Deduction from payments of UK public revenue dividends
Introduction
823
Overview of Chapter
(1)
This Chapter contains provision about the deduction of sums representing
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income tax from payments of UK public revenue dividends.
(2)
Section 824 defines “UK public revenue dividend”.
(3)
Section 825 contains a duty to deduct sums representing income tax from
payments of UK public revenue dividends unless they are payable gross.
(4)
Sections 826 and 827 explain when such payments are payable gross.
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(5)
Sections 828 and 829 make provision for the making, and withdrawal, of
applications for payments to be subject to the duty to deduct under this
Chapter.
(6)
Section 830 contains a regulation-making power in connection with payments
from which sums must be deducted under this Chapter.
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824
Meaning of “UK public revenue dividend”
In this Chapter “UK public revenue dividend” means any income from
securities which—
(a)
is paid out of the public revenue of the United Kingdom or Northern
Ireland, but
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(b)
is not interest on local authority stock.
Duty to deduct sums representing income tax
825
Duty to deduct from certain UK public revenue dividends
(1)
This section has effect if—
(a)
a payment of a UK public revenue dividend is made, and
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(b)
it is not payable gross under section 826.
(2)
The person by or through whom the payment is made must, on making the
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)
For provision about the collection of income tax in respect of a payment from
30
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.