Income and Corporation Taxes Act 1988

476 Building societies: regulations for payment of tax

(1) The Board may by regulations make provision with respect to any year of assessment requiring building societies, on such sums as may be determined in accordance with the regulations (including sums paid or credited before the beginning of the year but not previously brought into account under this subsection), to account for and pay an amount representing income tax calculated in part at the basic rate and in part at the reduced rate determined for the year of assessment concerned under section 483(1)(a); and in this section and section 477 such sums are referred to as “aggregate rate sums”.

(2) Regulations under subsection (1) may contain such incidental and consequential provisions as appear to the Board to be appropriate, including provisions requiring the making of returns.

(3) For any year of assessment to which regulations under subsection (1) above apply, dividends or interest payable in respect of shares in, or deposits with or loans to, a building society shall be dealt with for the purposes of corporation tax as follows—

(a) in computing for any accounting period ending in the year of assessment the income of the society from the trade carried on by it, there shall be allowed as a deduction the actual amount paid or credited in the accounting period of any such dividends or interest, together with any amount accounted for and paid by the society in respect thereof as representing income tax;

(b) in computing the income of a company which is paid or credited in the year of assessment with any such dividends or interest which are aggregate rate sums, the company shall—

(i) be treated as having received an amount which, after deduction of income tax, is equal to the amount paid or credited, and

(ii) be entitled to a set-off or repayment of income tax accordingly;

(c) no part of any such dividends or interest paid or credited in the year of assessment shall be treated as a distribution of the society or as franked investment income of any company resident in the United Kingdom.

(4) Nothing in section 326 shall be taken as affecting subsection (3)(a) above and that paragraph shall apply to any terminal bonus paid by the society under a certified contractual savings scheme as if it were a dividend on a share in the society.

(5) Except in so far as regulations under subsection (1) above otherwise provide, for any year of assessment to which such regulations apply—

(a) notwithstanding anything in sections 348 to 350, income tax shall not be deducted from any dividends or interest payable in that year in respect of shares in or deposits with or loans to a building society;

(b) subject to subsections (3)(b), (6) and (7) of this section, no repayment of income tax and no assessment to income tax shall be made in respect of any such dividends or interest to or on the person receiving or entitled to the dividends or interest;

(c) any amounts paid or credited in respect of any such dividends or interest shall in computing the total income of an individual entitled thereto be treated as income for that year received by him after deduction of income tax from a corresponding gross amount;

(d) subject to section 7(1), the amounts so paid or credited (and no more) shall, in applying sections 348 and 349(1) to other payments, be treated as profits or gains which have been brought into charge to income tax.

(6) Subsection (5)(b) above shall not prevent an assessment in respect of income tax at a rate other than the basic rate.

(7) Subsection (5)(b) above shall not apply to sums which are payable to exempt pension funds and which are aggregate rate sums; but the amounts paid or credited in respect of such sums shall be treated as paid or credited after deduction of income tax from a corresponding gross amount.

In this subsection “exempt pension fund” means any fund or scheme in the case of which provision is made by section 592(2), 613(4), 614(1), (2) or (3), 620(6) or 643(2) for exempting the whole or part of its income from income tax.

(8) For the purpose of determining whether any or what amount of tax is, by virtue of subsection (5)(c) above, to be taken into account as having been deducted from a gross amount in the case of an individual whose total income is reduced by any deductions, so much only of that gross amount shall be taken into account as is part of his total income as so reduced.

(9) Notwithstanding anything in sections 348 to 350, for any year of assessment to which regulations under subsection (1) above apply income tax shall not be deducted upon payment to the society of any interest on advances, being interest payable in that year.

(10) Subsection (9) above shall not apply to any payment of relevant loan interest to which section 369 applies.

(11) In this section “dividend” has the meaning given by regulations under subsection (1) above, but any sum which is paid by a building society by way of dividend and which is not an aggregate rate sum shall be treated for the purposes of Schedule D as paid by way of interest.