Income Tax Bill

House of Commons

Session 2006 - 07
Internet Publications
Other Bills before Parliament

Income Tax Bill

Income Tax Bill
Part 15 — Deduction of income tax at source
Chapter 2 — Deduction by deposit-takers and building societies
427

Duty to deduct sums representing income tax
851
Duty to deduct sums representing income tax
(1)
This section applies if—
(a)
a deposit-taker or building society makes a payment of interest on an
investment (see section 855(1)), and
5
(b)
when the payment is made, the investment is a relevant investment (see
section 856).
(2)
The deposit-taker or building society 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.
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(3)
For provision about the collection of income tax in respect of a payment from
which a sum must be deducted under this section, see Chapter 15.
852
Power to make regulations disapplying section 851
(1)
The Commissioners for Her Majesty’s Revenue and Customs may make
regulations which provide that section 851 does not apply in relation to a
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payment of interest if prescribed conditions are met.
(2)
The regulations may, in particular, include—
(a)
provision for a certificate to be supplied to the effect that the person
beneficially entitled to a payment is unlikely to be liable to pay any
income tax for the tax year in which it is made,
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(b)
provision for the certificate to be supplied by that person or another
prescribed person,
(c)
provision about the time when, and the manner in which, a certificate
is to be supplied, and
(d)
provision about the form and contents of a certificate.
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(3)
Any provision included in the regulations under subsection (2)(d) may allow
the Commissioners to make requirements about the form and contents of a
certificate.
(4)
In this section “prescribed” means prescribed in the regulations.
Deposit-takers and relevant investments
30
853
Meaning of “deposit-taker”
(1)
In this Chapter “deposit-taker” means—
(a)
the Bank of England, or
(b)
a person to whom one of the following subsections or section 854
applies.
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(2)
This subsection applies to a person—
(a)
who has permission under Part 4 of FISMA 2000 to accept deposits
which are relevant investments, and
(b)
who is not—
(i)
a building society,
40

Income Tax Bill
Part 15 — Deduction of income tax at source
Chapter 2 — Deduction by deposit-takers and building societies
428

(ii)
a society registered within the meaning of the Friendly Societies
Act 1974 (c. 46) or incorporated under the Friendly Societies Act
1992 (c. 40),
(iii)
a society registered as a credit union under the Industrial and
Provident Societies Act 1965 (c. 12) or the Credit Unions
5
(Northern Ireland) Order 1985 (S.I. 1985/1205 (N.I. 12)), or
(iv)
an insurance company within the meaning of section 275 of FA
2004.
(3)
This subsection applies to a company within the meaning of the Companies
Act 1985 (c. 6)—
10
(a)
in respect of which a resolution has been passed by a local authority
under—
(i)
section 48(3) of the Banking Act 1979 (c. 37), or
(ii)
section 103(3) of the Banking Act 1987 (c. 22), and
(b)
which is exempt from the prohibition in section 19 of FISMA 2000 on
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accepting deposits which are relevant investments.
(4)
This subsection applies to a local authority.
(5)
This subsection applies to an EEA firm which—
(a)
is of the kind mentioned in paragraph 5(b) of Schedule 3 to FISMA 2000
(EEA passport rights), and
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(b)
has permission under paragraph 15 of that Schedule to accept deposits
(as a result of qualifying for authorisation under paragraph 12(1) of that
Schedule).
(6)
This subsection applies to a person—
(a)
who is authorised for the purposes of FISMA 2000, and
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(b)
whose business consists wholly or mainly of dealing in financial
instruments as principal.

For the meaning of “financial instrument”, see section 984.
854
Power to prescribe persons as deposit-takers
(1)
This section applies to a person who receives deposits in the course of carrying
30
on business or activities and—
(a)
is for the time being prescribed by order by the Treasury for the
purposes of this section, or
(b)
is a member of a class of persons which is for the time being so
prescribed.
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(2)
An order under this section may prescribe a person or class of person—
(a)
in relation to all deposits which are relevant investments, or
(b)
in relation to deposits which are relevant investments of a kind
specified in the order.
(3)
If a person is prescribed only in relation to deposits which are relevant
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investments of a kind specified in the order, the reference in section 851(1)(b)
to “relevant investment” is to be read as a reference only to relevant
investments of the kind so specified.

Income Tax Bill
Part 15 — Deduction of income tax at source
Chapter 2 — Deduction by deposit-takers and building societies
429

855
Meaning of “investment” and “deposit”
(1)
In this Chapter “investment” means—
(a)
a deposit with a deposit-taker,
(b)
a deposit with a building society,
(c)
shares in a building society, or
5
(d)
a loan to a building society.
(2)
In this Chapter “deposit” means a sum of money paid on terms which mean
that it will be repaid (with or without interest)—
(a)
on demand, or
(b)
at a time or in circumstances agreed by or on behalf of the person who
10
pays it and the person who receives it.
856
Investments which are relevant investments
(1)
An investment is a relevant investment for the purposes of this Chapter if it
meets—
(a)
the individual interest condition (see subsection (3)),
15
(b)
the Scottish partnership condition (see subsection (4)),
(c)
the personal representative condition (see subsection (5)), or
(d)
the settlement condition (see subsection (6)).
(2)
But an investment is not a relevant investment if any of sections 858 to 870
prevent it from being a relevant investment.
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(3)
An investment meets the individual interest condition if the only persons
beneficially entitled to interest on the investment are individuals.
(4)
An investment meets the Scottish partnership condition if—
(a)
a Scottish partnership is beneficially entitled to all interest on the
investment, and
25
(b)
that partnership consists only of individuals.
(5)
An investment meets the personal representative condition if personal
representatives are entitled to any interest on the investment and they receive
it in that capacity.
(6)
An investment meets the settlement condition if all interest on the investment
30
is income arising to the trustees of a discretionary or accumulation settlement
and they receive it in that capacity.

For the meaning of “discretionary or accumulation settlement”, see section
873(1).
857
Investments to be treated as being or as not being relevant investments
35
(1)
A deposit-taker or building society must treat every investment with it as a
relevant investment unless satisfied that the investment is not a relevant
investment.
(2)
If a deposit-taker or building society is satisfied that an investment is not a
relevant investment, it may continue to treat the investment as not being a
40
relevant investment until subsection (3) applies.

Income Tax Bill
Part 15 — Deduction of income tax at source
Chapter 2 — Deduction by deposit-takers and building societies
430

(3)
This subsection applies when the deposit-taker or building society has
information which can reasonably be taken to indicate that the investment is or
may be a relevant investment.
Investments which are not relevant investments: non-UK resident beneficiaries
858
Declarations of non-UK residence: individuals
5
(1)
This section applies to an investment with a deposit-taker or building society
which meets the individual interest condition in section 856(3).
(2)
The investment is not a relevant investment if—
(a)
an appropriate person has made the declaration set out in subsection
(3) to the deposit-taker or building society,
10
(b)
the declaration contains the undertaking set out in subsection (4),
(c)
the declaration contains the name and principal residential address of
the individual or (as the case may be) each of the individuals entitled to
the interest,
(d)
the declaration contains such other information as the Commissioners
15
for Her Majesty’s Revenue and Customs may reasonably require, and
(e)
the declaration is in such form as the Commissioners may prescribe or
authorise.
(3)
The declaration is that, at the time when the declaration is made—
(a)
the person who is beneficially entitled to the interest is not ordinarily
20
UK resident, or
(b)
(as the case may be) all the persons who are so entitled are not
ordinarily UK resident.
(4)
The undertaking is an undertaking by the person making it to notify the person
to whom it is made if any individual in respect of whom it is made becomes
25
ordinarily UK resident.
(5)
In this section “appropriate person” means—
(a)
a person who is beneficially entitled to interest on the investment, or
(b)
a person to whom any such interest is payable.
859
Declarations of non-UK residence: Scottish partnerships
30
(1)
This section applies to an investment with a deposit-taker or building society
which meets the Scottish partnership condition in section 856(4).
(2)
The investment is not a relevant investment if—
(a)
an appropriate person has made the declaration set out in subsection
(3) to the deposit-taker or building society,
35
(b)
the declaration contains the undertaking set out in subsection (4),
(c)
the declaration contains the name and principal residential address of
each of the partners,
(d)
the declaration contains such other information as the Commissioners
for Her Majesty’s Revenue and Customs may reasonably require, and
40
(e)
the declaration is in such form as the Commissioners may prescribe or
authorise.

Income Tax Bill
Part 15 — Deduction of income tax at source
Chapter 2 — Deduction by deposit-takers and building societies
431

(3)
The declaration is that, at the time when the declaration is made, all of the
partners of the partnership are not ordinarily UK resident.
(4)
The undertaking is an undertaking by the person making it to notify the person
to whom it is made if any partner in respect of whom it is made becomes
ordinarily UK resident.
5
(5)
In this section “appropriate person” means—
(a)
the partnership that is beneficially entitled to the interest on the
investment, or
(b)
a person to whom any such interest is payable.
860
Declarations of non-UK residence: personal representatives
10
(1)
This section applies to an investment with a deposit-taker or building society
which meets the personal representative condition in section 856(5).
(2)
The investment is not a relevant investment if—
(a)
an appropriate person has made the declaration set out in subsection
(3) to the deposit-taker or building society,
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(b)
the declaration contains such information as the Commissioners for
Her Majesty’s Revenue and Customs may reasonably require, and
(c)
the declaration is in such form as the Commissioners may prescribe or
authorise.
(3)
The declaration is that the deceased was not ordinarily UK resident
20
immediately before the deceased’s death.
(4)
In this section “appropriate person” means—
(a)
any of the personal representatives who are entitled to receive interest
on the investment, or
(b)
a person to whom any such interest is payable.
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861
Declarations of non-UK residence: settlements
(1)
This section applies to an investment with a deposit-taker or building society
which meets the settlement condition in section 856(6).
(2)
The investment is not a relevant investment if—
(a)
an appropriate person has made the declaration set out in subsection
30
(3) to the deposit-taker or building society,
(b)
the declaration contains the undertaking set out in subsection (4),
(c)
the declaration contains such information as the Commissioners for
Her Majesty’s Revenue and Customs may reasonably require, and
(d)
the declaration is in such form as the Commissioners may prescribe or
35
authorise.
(3)
The declaration is that, at the time when the declaration is made—
(a)
the trustees who are entitled to the interest are non-UK resident (see
section 475), and
(b)
no person who is a trustee has reasonable grounds for believing that
40
any beneficiary under the settlement is—
(i)
an individual who is ordinarily UK resident,
(ii)
a company which is UK resident, or

Income Tax Bill
Part 15 — Deduction of income tax at source
Chapter 2 — Deduction by deposit-takers and building societies
432

(iii)
a Scottish partnership any of the partners of which is an
individual who is ordinarily UK resident or a company which
is UK resident.
(4)
The undertaking is an undertaking by the person making it to notify the person
to whom it is made if—
5
(a)
the trustees become UK resident,
(b)
an individual in respect of whom it is made becomes ordinarily UK
resident,
(c)
a company in respect of which it is made becomes UK resident,
(d)
an individual partner in any Scottish partnership in respect of which it
10
is made becomes ordinarily UK resident,
(e)
a company partner in any Scottish partnership in respect of which it is
made becomes UK resident,
(f)
a partner who is an ordinarily UK resident individual or a UK resident
company joins any Scottish partnership in respect of which it is made,
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or
(g)
a person within any of sub-paragraphs (i) to (iii) of subsection (3)(b)
becomes or is found to be a beneficiary under the settlement to which
the declaration relates.
(5)
In this section “appropriate person” means—
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(a)
any person who is a trustee entitled to receive interest on the
investment, or
(b)
a person to whom any such interest is payable.
(6)
References in this section to a beneficiary under the settlement are to be
construed in accordance with section 873(3) (meaning of “beneficiary under a
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discretionary or accumulation settlement”).
862
Inspection of declarations
(1)
This section applies if an officer of Revenue and Customs by notice requires a
deposit-taker or building society to make available for inspection the
declarations made to it under sections 858 to 861 which are referred to in the
30
notice.
(2)
The deposit-taker or building society must make the declarations available for
inspection—
(a)
by an officer of Revenue and Customs who is named in the notice, and
(b)
within such time as the notice may specify.
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(3)
An officer of Revenue and Customs to whom the declarations must be made
available may take copies or extracts from them.
Other investments which are not relevant investments
863
General client account deposits
(1)
An investment is not a relevant investment if it is a general client account
40
deposit.
(2)
An investment is a general client account deposit for the purposes of this
section if—

Income Tax Bill
Part 15 — Deduction of income tax at source
Chapter 2 — Deduction by deposit-takers and building societies
433

(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
the clients for whom, or on whose account, that person received the
5
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
account it is.
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864
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 986).
865
Qualifying certificates of deposit
15
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 985).
866
Qualifying time deposits
(1)
An investment is not a relevant investment if it is a qualifying time deposit.
20
(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,
(c)
those terms do not make provision for the transfer of the right to
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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
£50,000 at the time the deposit is made.
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867
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.
(2)
In this section “premium trust fund” has the meaning given in section 184 of
FA 1993.
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868
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
tax purposes, and