Finance Act 2016

Section 39

SCHEDULE 6 U.K. Deduction of income tax at source

PART 1 U.K. Abolition of duty to deduct tax from interest on certain investments

1 U.K. In Chapter 2 of Part 15 of ITA 2007 (deduction of income tax at source by deposit-takers and building societies) omit—

(a) section 851 (duty to deduct when making payment of interest on relevant investment), and

(b) the italic heading preceding it.

PART 2 U.K. Deduction of tax from yearly interest: exception for deposit-takers

2 U.K. In section 876 of ITA 2007 (interest paid by deposit-takers), for subsections (1) and (2) substitute—

“(1) The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest on an investment if—

(a) the payment is made by a deposit-taker, and

(b) when the payment is made, the investment is a relevant investment.

(1A) In this section “deposit-taker”, “investment” and “relevant investment” have the meaning given by Chapter 2.”

PART 3 U.K. Amendments of or relating to Chapter 2 of Part 15 of ITA 2007

Amendments of Chapter 2 of Part 15 of ITA 2007 U.K.

3 U.K. Chapter 2 of Part 15 of ITA 2007 (deduction of income tax at source by deposit-takers and building societies) is amended in accordance with paragraphs 4 to 18.

4 U.K. For the Chapter heading substitute “ Meaning of “relevant investment” for purposes of section 876 ”.

5 (1) Section 850 (overview of Chapter) is amended as follows. U.K.

(2) For subsection (1) substitute—

“(1) This Chapter has effect for the purposes of section 876 (duty under section 874 to deduct tax from payments of yearly interest: exception for deposit-takers).”

(3) Omit subsection (2) (which introduces sections 851 and 852).

(4) In subsection (4)(b) (which introduces sections 858 to 870), for “858” substitute “ 863 ”.

(5) In subsection (5) (which introduces sections 871 to 873), for “871 to” substitute “ 872 and ”.

(6) In subsection (6) (interpretation), for the words from “Chapter—” to “crediting” substitute “ Chapter, crediting ”.

6 U.K. Omit section 852 (power to disapply section 851).

7 U.K. In section 853(1) (meaning of “deposit-taker”), after “In this Chapter” insert “ and section 876 ”.

8 U.K. In section 854(3) (meaning of “relevant investment” in section 851(1)(b)), for “851(1)(b)” substitute “ 876(1)(b) ”.

9 U.K. For section 855(1) (meaning of “investment”) substitute—

“(1) In this Chapter, and section 876, “investment” means a deposit with a deposit-taker.”

10 (1) Section 856 (meaning of “relevant investment”) is amended as follows. U.K.

(2) In subsection (1), for “this Chapter” substitute “ section 876 ”.

(3) In subsection (2) (exceptions), for “858” substitute “ 863 ”.

11 U.K. In section 857 (treating investments as being or not being relevant investments) omit “or building society” in each place.

12 U.K. Omit—

(a) sections 858 to 861 (investments which are not relevant investments and in relation to which duty under section 874 does not apply), and

(b) the italic heading preceding section 858.

13 U.K. In the italic heading preceding section 863, for “Other investments” substitute “ Investments ”.

14 U.K. In sections 863, 864, 865 and 868(4) (investments with deposit-takers or building societies) omit “or building society” in each place.

15 U.K. Omit sections 868(3), 869 and 870(2) (investments with building societies).

16 U.K. Omit section 871 (power to make regulations to give effect to Chapter).

17 U.K. In section 872 (power to amend Chapter)—

(a) in subsection (2) (different provision for different deposit-takers)—

(i) for “which amends this Chapter in its application to deposit-takers may do so” substitute “ may amend this Chapter ”, and

(ii) in each of paragraphs (a) and (b), for “relation” substitute “ its application ”, and

(b) omit subsections (4) and (5) (which refer to provisions repealed by this Act).

18 U.K. Omit section 873(3) to (6) (interpretation of section 861).

Amendments relating to Chapter 2 of Part 15 of ITA 2007 U.K.

19 U.K. In Schedule 12 to FA 1988 (transfer of building society's business to a company), in paragraph 6(1) (treatment for tax purposes of benefits conferred in connection with a transfer) omit—

(a) “either”, and

(b) paragraph (b) (benefit not to be subject to deduction of tax under Chapter 2 of Part 15 of ITA 2007), and the “or” preceding it.

20 (1) In section 564Q(1) of ITA 2007 (alternative finance return: deduction of income tax at source under Chapter 2 of Part 15)— U.K.

(a) after “Chapter 2 of Part 15” insert “ and section 876 ”,

(b) for “deduction by deposit-takers and building societies” substitute “ exception for deposit-takers ”, and

(c) after “Chapter 2 of that Part” insert “ and section 876 ”.

(2) In section 564Q(5) of ITA 2007 (alternative finance return: deduction of income tax at source under Chapters 3 to 5 of Part 15)—

(a) after “of Part 15” insert “ except section 876 ”, and

(b) for “those Chapters” substitute “ those provisions ”.

21 U.K. In section 847 of ITA 2007 (overview of Part 15)—

(a) in subsection (2) omit paragraph (a) (which introduces Chapter 2), and

(b) in subsection (5) (which introduces Chapters containing provision connected with the duties to deduct), before paragraph (a) insert—

“(za) Chapter 2 (interpretation of section 876 in Chapter 3: exception for deposit-takers),”.

22 U.K. In section 946 of ITA 2007 (collection of tax deducted at source: payments to which Chapter applies) omit paragraph (a) (payments from which deductions required to be made under section 851).

23 U.K. In Schedule 2 to ITA 2007 omit paragraphs 154 to 156 (transitional provisions related to Chapter 2 of Part 15 of ITA 2007).

24 U.K. In Schedule 4 to ITA 2007 (index of defined expressions)—

(a) omit the entry for “beneficiary under a discretionary or accumulation settlement (in Chapter 2 of Part 15)”,

(b) in the entry for “deposit-taker (in Chapter 2 of Part 15)”, after “Part 15” insert “ and section 876 ”,

(c) omit the entry for “dividend (in Chapter 2 of Part 15)”,

(d) in the entry for “investment (in Chapter 2 of Part 15)”, after “Part 15” insert “ and section 876 ”, and

(e) omit the entry for “relevant investment (in Chapter 2 of Part 15)”.

25 U.K. In consequence of the amendments made by Part 1 of this Schedule and the preceding provisions of this Part of this Schedule—

(a) in Schedule 1 to ITA 2007 omit paragraph 277,

(b) in Schedule 1 to FA 2008 omit paragraph 25,

(c) in Schedule 46 to FA 2013—

(i) in paragraph 68(1) omit paragraph (a) including the “and” at the end,

(ii) in paragraph 69(1) omit paragraph (a) including the “and” at the end,

(iii) omit paragraph 70(1), and

(iv) in paragraph 71(3) omit paragraph (b) and the “and” preceding it, and

(d) in FA 2014 omit section 3(4).

PART 4 U.K. Deduction of tax from UK public revenue dividends

26 U.K. In section 877 of ITA 2007 (duty to deduct under section 874: exception relating to UK public revenue dividends)—

(a) for “in respect of” substitute “ that is ”, and

(b) after “dividend” insert “ (as defined by section 891) ”.

27 (1) Chapter 5 of Part 15 of ITA 2007 (deduction from payments of UK public revenue dividends) is amended as follows. U.K.

(2) In section 893(2) (securities which are gross-paying government securities)—

(a) before the “or” at the end of paragraph (a) insert—

“(aa) securities, so far as they are not gilt-edged securities, issued or treated as issued under—

(i) the National Loans Act 1939, or

(ii) the National Loans Act 1968,”, and

(b) in paragraph (b), for “894(1) or (3)” substitute “ 894(3) ”.

(3) In section 894 (power to direct that securities are gross-paying government securities)—

(a) omit subsections (1) and (2) (power in relation to securities within the new section 893(2)(aa)), and

(b) in subsection (5) omit “(1) or”.

PART 5 U.K. Commencement

28 (1) The amendments made by Parts 1 and 3 of this Schedule have effect in relation to— U.K.

(a) interest paid or credited on or after 6 April 2016, and

(b) dividends or other distributions paid by a building society on or after that date.

(2) Sub-paragraph (1) does not apply to—

(a) the repeals in Schedule 12 to FA 1988;

(b) the amendments in section 564Q of ITA 2007;

(c) the repeal of paragraph 277 of Schedule 1 to ITA 2007.

(3) The repeals mentioned in sub-paragraph (2)(a) and (c) have effect in relation to benefits conferred on or after 6 April 2016.

(4) The amendments mentioned in sub-paragraph (2)(b) have effect in relation to alternative finance return paid on or after 6 April 2016.

(5) The amendments made by Part 2 of this Schedule, and the amendments made by this Schedule in sections 893 and 894 of ITA 2007, have effect in relation to interest paid on or after 6 April 2016.