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 5 — Deduction from payments of UK public revenue dividends
441

(3)
Section 892 contains a duty to deduct sums representing income tax from
payments of UK public revenue dividends unless they are payable gross.
(4)
Sections 893 and 894 explain when such payments are payable gross.
(5)
Sections 895 and 896 make provision for the making, and withdrawal, of
applications for payments to be subject to the duty to deduct under this
5
Chapter.
(6)
Section 897 contains a regulation-making power in connection with payments
from which sums must be deducted under this Chapter.
891
Meaning of “UK public revenue dividend”
In this Chapter “UK public revenue dividend” means any income from
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securities which—
(a)
is paid out of the public revenue of the United Kingdom or Northern
Ireland, but
(b)
is not interest on local authority stock.
Duty to deduct sums representing income tax
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892
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
(b)
it is not payable gross under section 893.
(2)
The person by or through whom the payment is made must, on making the
20
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
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.
Payments which are payable gross
893
Payments of UK public revenue dividends which are payable gross
(1)
A payment of a UK public revenue dividend is payable gross if—
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(a)
it is a payment of interest on gross-paying government securities, and
(b)
no deduction at source application has effect in respect of the securities
at the time the payment is made (see section 895).
(2)
In this Chapter “gross-paying government securities” means—
(a)
gilt-edged securities (see section 1024), or
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(b)
securities which are the subject of a Treasury direction under section
894(1) or (3).

Income Tax Bill
Part 15 — Deduction of income tax at source
Chapter 5 — Deduction from payments of UK public revenue dividends
442

894
Treasury directions
(1)
The Treasury may direct that any securities to which subsection (2) applies are
gross-paying government securities.
(2)
This subsection applies to any securities, so far as they are not gilt-edged
securities, issued or treated as issued under—
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(a)
the National Loans Act 1939 (c. 117), or
(b)
the National Loans Act 1968 (c. 13).
(3)
The Treasury may, at the request of the Department of Finance and Personnel
for Northern Ireland, direct that any securities issued under section 11(1)(c) of
the Exchequer and Financial Provisions Act (Northern Ireland) 1950 (c. 3 (N.I.))
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are gross-paying government securities.
(4)
In relation to any securities which are gross-paying government securities by
virtue of a direction under subsection (3)—
(a)
references in sections 895 and 896 to “the Registrar” are to be read as
references to the bank in the books of which the securities are registered
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or inscribed, and
(b)
references in those sections to the Treasury are to be read as references
to the Department of Finance and Personnel for Northern Ireland.
(5)
A direction under subsection (1) or (3) in respect of any securities may provide
that the direction is to have effect in relation only to payments of interest on the
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securities made on or after a date specified in the direction.
Deduction at source applications
895
Deduction at source application
(1)
The holder of registered gross-paying government securities may make a
deduction at source application in respect of the securities.
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(2)
A deduction at source application in respect of any securities is an
application—
(a)
for payments of interest on those securities to be subject to the duty to
deduct sums representing income tax under section 892,
(b)
made to the Registrar, and
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(c)
made in such form as the Registrar may, with the approval of the
Treasury, prescribe.
(3)
A deduction at source application in respect of any securities has effect from
the date which is one month after the date on which it is made until—
(a)
the securities cease to be registered in the name of the person who made
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the application, or
(b)
the application ceases to have effect under section 896 following its
withdrawal in accordance with that section.
(4)
If any registered gross-paying government securities are held on trust, the
holders of the securities may make a deduction at source application in respect
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of them without the consent of any other person.
(5)
Subsection (4) applies despite anything in the instrument creating the trust.
(6)
In this Chapter—

Income Tax Bill
Part 15 — Deduction of income tax at source
Chapter 6 — Deduction from annual payments and patent royalties
443

“registered” means—
(a)
entered in the register of the Registrar, or
(b)
entered in a register maintained in accordance with regulations
under section 207 of the Companies Act 1989 (c. 40) (transfer of
securities without written instrument), and
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“the Registrar” means the person or persons appointed in accordance
with regulations under section 47(1)(b) of FA 1942 (see regulation 3 of
the Government Stock Regulations 2004 (S.I. 2004/1611)).
896
Withdrawal of application
(1)
A deduction at source application may be withdrawn by notice given to the
10
Registrar by the holder of the securities.
(2)
The notice must be given in such form as the Registrar may, with the approval
of the Treasury, prescribe.
(3)
If withdrawn, a deduction at source application ceases to have effect on the
date which is one month after the date on which the notice of withdrawal is
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received by the Registrar.
Regulations
897
Power to make regulations
(1)
The Commissioners for Her Majesty’s Revenue and Customs may by
regulations—
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(a)
make provision as to the time and manner in which persons are to
account for and pay income tax in respect of payments from which they
are required to deduct sums representing income tax under section 892,
and
(b)
otherwise modify the provisions of section 892 and Chapters 15 and 16
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in their application to such payments.
(2)
Regulations under this section may—
(a)
make different provision for different descriptions of UK public
revenue dividend and for different circumstances, and
(b)
contain incidental, supplemental, consequential and transitional
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provision and savings.
(3)
The Commissioners for Her Majesty’s Revenue and Customs must not make
any regulations under this section unless a draft of them has been laid before
and approved by a resolution of the House of Commons.
Chapter 6
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Deduction from annual payments and patent royalties
Introduction
898
Overview of Chapter
(1)
This Chapter deals with the deduction of sums representing income tax from—

Income Tax Bill
Part 15 — Deduction of income tax at source
Chapter 6 — Deduction from annual payments and patent royalties
444

(a)
qualifying annual payments, and
(b)
royalties or other sums paid in respect of the use of patents.
(2)
See also—
(a)
Chapter 11 (payments between companies etc) for an exception from
the duties to deduct sums representing income tax under this Chapter,
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(b)
Chapter 4 of Part 8, which gives relief for certain payments from which
sums representing income tax must be deducted under this Chapter,
and
(c)
section 615(3) of ICTA (exemption from tax in respect of certain
pensions) which contains a further exception from the duties to deduct
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sums representing income tax under this Chapter.
(3)
If a payment to which a provision of this Chapter applies is also one to which
section 906 applies, it is treated as not being a payment to which a provision of
this Chapter applies.
899
Meaning of “qualifying annual payment”
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(1)
In this Chapter “qualifying annual payment” means an annual payment that
meets the conditions in subsections (2) to (5).
(2)
The payment must arise in the United Kingdom.
(3)
If the recipient is a person other than a company, the payment must be—
(a)
a payment charged to income tax under—
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(i)
Chapter 7 of Part 4 of ITTOIA 2005 (purchased life annuity
payments),
(ii)
section 579 of that Act (royalties etc from intellectual property),
(iii)
Chapter 4 of Part 5 of that Act (certain telecommunication
rights: non-trading income), or
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(iv)
Chapter 7 of Part 5 of that Act (annual payments not otherwise
charged), or
(b)
a payment charged to income tax under Part 9 of ITEPA 2003 because
section 609 or 611 of that Act applies to it (certain employment-related
annuities).
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(4)
If the recipient is a company, the payment must be—
(a)
a payment charged to income tax as mentioned in subsection (3)(a), or
(b)
a payment charged to corporation tax under Case III of Schedule D.
(5)
The payment must not be—
(a)
interest,
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(b)
a qualifying donation as defined in section 339 of ICTA (donations to
charity by companies),
(c)
a payment which is a qualifying donation for the purposes of Chapter
2 of Part 8 (gift aid),
(d)
a payment in relation to which income tax is treated as having been
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paid under section 494(3) (income tax treated as paid by beneficiary or
settlor in relation to discretionary trust),
(e)
a payment which would fall within paragraph (d) but for the fact that
the trustees making the payment are non-UK resident, or
(f)
an annual payment to which section 904 applies (annual payments for
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dividends or non-taxable consideration).