Finance Act 1984

Section 27(3).

SCHEDULE 8 INTEREST PAID ON DEPOSITS WITH BANKS ETC

General

1 (1) In this Schedule "the principal section" means section 27 of this Act

(2) Any amount which is credited as interest in respect of a relevant deposit shall, for the purposes of the principal section and (his Schedule, be treated as a payment of interest

Meaning of " deposit-taker "

2 (1) In the principal section and in this Schedule "deposit-taker " means any of the following—

(a) the Bank of England ;

(b) any recognised bank, licensed institution or municipal bank (within die meaning of the [1979 c. 37.] Banking Act 1979);

(c) the Post Office;

(d) any trustee savings bank within the meaning of the [1981 c. 65.] Trustee Savings Banks Act 1981 ;

(e) any bank formed under the [1819 c. 62.] Savings Bank (Scotland) Act 1819; and

(f) any person or class of person which receives deposits in the course of his business or activities and which is for the time being prescribed by order made by the Treasury by statutory instrument for the purposes of this section.

(2) Where the Treasury makes an order under sub-paragraph (1)(f) above, the order shall have effect from the beginning of the first year of assessment which begins after the date on which the order is made.

(3) An order under sub-paragraph (1)(f) above shall be subject to annulment in pursuance of a resolution of the Commons House of Parliament.

Meaning of " deposit" and " relevant deposit"

3 (1) In the principal section and in this Schedule " deposit" means a sum of money paid on terms under which it will be repaid with or without interest and either on demand or at a time or in circumstances agreed by or on behalf of the person making the payment and the person to whom it is made.

(2) For the purposes of the principal section and this Schedule, a deposit is a " relevant deposit" if, but only if—

(a) the person who is beneficially entitled to any interest in respect of the deposit is an individual or, where two or more persons are so entitled, all of them are individuals ; or

(b) the person entitled to any such interest receives it as a personal representative in his capacity as such ;

and the deposit is not prevented from being a relevant deposit by sub-paragraph (3) below.

(3) A deposit is not a relevant deposit if—

(a) a qualifying certificate of deposit has been issued in respect of it or it is a qualifying time deposit;

(b) it is a debt on a debenture (" debenture " having the meaning given in section 455 of the [1948 c. 38.] Companies Act 1948) issued by the deposit-taker ;

(c) it is a loan made by a deposit-taker in the ordinary course of his business or activities ;

(d) it is a debt on a security which is listed on a recognised stock exchange (within the meaning of section 535 of the Taxes Act);

(e) it is made by a Stock Exchange money broker (recognised by the Bank of England) in the course of his business as such a broker;

(f) in the case of a deposit-taker resident in the United Kingdom for the purposes of income or corporation tax, it is held at a branch of his situated outside the United Kingdom ;

(g) in the case of a deposit-taker who is not so resident, it is held otherwise than at a branch of his situated in the United Kingdom ; or

(h) the appropriate person has declared in writing to the deposit-taker liable to pay interest in respect of the deposit that—

(i) at the time when the declaration is made, the person who is beneficially entitled to the interest is not, or, as the case may be, all of the persons who are so entitled are not, ordinarily resident in the United Kingdom ;

(ii) in a case falling within sub-paragraph (2)(b) above, the deceased was, immediately before his death, not ordinarily resident in the United Kingdom.

(4) A declaration under sub-paragraph (3)(h)(i) shall contain an undertaking by the person making it that if the person, or any of the persons, in respect of whom it is made becomes ordinarily resident in the United Kingdom he will notify the deposit-taker accordingly.

(5) A deposit-taker shall, on being so required by notice given to him in writing by an inspector, make all declarations which have been made to him under sub-paragraph (3) above available for inspection by the inspector or by a named officer of the Board.

(6) Where a notice has been given to a deposit-taker under sub-paragraph (5) above, the declarations shall be made available within such time as may be specified in the notice; and the person to whom they are to be made available may take copies of, or extracts from, them.

(7) A deposit-taker shall treat every deposit made with him as a relevant deposit unless satisfied that it is not a relevant deposit; but where he has satisfied himself that a deposit is not a relevant deposit he shall be entitled to continue to so treat it until such time as he is in possession of information which can reasonably be taken to indicate that the deposit is, or may be, a relevant deposit.

(8) In sub-paragraph (3) above—

• " appropriate person", in relation to a deposit, means any person who is beneficially entitled to any interest in respect of the deposit or entitled to receive any such interest as a personal representative in his capacity as such or to whom any such interest is payable ;

• " qualifying certificate of deposit" means a certificate of deposit, as denned in section 55(3) of the [1968 c. 44.] Finance Act 1968, which is issued by a deposit-taker and under which—

  (a)

  the amount payable by the deposit-taker, exclusive of interest, is not less than £50,000 (or, for a deposit denominated in foreign currency, not less than the equivalent of £50,000 at the time when the deposit is made); and

  (b)

  the obligation of the deposit-taker to pay that amount arises after a period of not less than 28 days beginning with the date on which the deposit is made ; and

• " qualifying time deposit" means a deposit which is made by way of loan for an amount which is not less than £50,000 (or, for a deposit denominated in foreign currency, not less than the equivalent of £50,000 at the time when the deposit is made) and on terms which—

  (a)

  prevent repayment of the deposit before the expiry of the period of 28 days beginning with the date on which the deposit is made, but which require repayment at the end of a specified period ;

  (b)

  do not make provision for the transfer of the right to repayment; and

  (c)

  prevent partial withdrawals of, or additions to, the deposit.

(9) For the purposes of sub-paragraph (3)(f) and (g) above, a deposit is held at a branch of a deposit-taker if it is recorded in his books as a liability of that branch.

Assessments to income tax etc.

4 (1) Where in relation to any payment of interest (the "payment ") a deposit-taker is liable to account for and pay an amount under the principal section—

(a) subject to sub-paragraph (2) below, no assessment to income tax shall be made on, and no repayment of income tax shall be made to, the person receiving or entitled to the payment in respect of it;

(b) the payment shall, in computing the total income of the person entitled to it, be treated as income for that year received by him after deduction of income tax at the basic rate from a corresponding gross amount; and

(c) the payment (and no more) shall, in applying sections 52 and 53 of the Taxes Act to other payments be treated as profits or gains which have been brought into charge to income tax.

(2) Sub-paragraph (1)(a) above shall not prevent an assessment in respect of income tax at a rate other than the basic rate.

(3) For the purpose of determining whether any or what amount of tax is, by virtue of sub-paragraph (1)(b) 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.

Collection

5 (1) Any payment of interest in respect of which an amount is payable under the principal section shall be a relevant payment for the purposes of Schedule 20 to the [1972 c. 41.] Finance Act 1972 (collection of income tax on company payments which are not distributions) whether or not the deposit-taker making the payment is resident in the United Kingdom.

(2) Schedule 20 to that Act shall apply in relation to any payment which is a relevant payment by virtue of sub-paragraph (1) above—

(a) with the substitution for any reference to a company of a reference to a deposit-taker ;

(b) as if any amount payable under the principal section were payable as income tax ;

(c) as if paragraph 5 (set-off of income tax on deposit-taker's income against liability under the principal section) applied only in relation to payments received by the deposit-taker after 5th April 1985 and falling to be taken into account in computing his income chargeable to corporation tax; and

(d) as if in paragraph 7 (amounts set-off under paragraph 5 not to be set-off also under section 240(5) of the Taxes Act) the reference to section 240(5) included a reference to sections 53 and 246(3) of that Act.

(3) In relation to any deposit-taker who is not a company Schedule 20 shall have effect as if—

(a) paragraph 5 were omitted ; and

(b) references to accounting periods were references to periods for which the deposit-taker makes up his accounts.

Transitional provisions

6 (1) Any deposit denominated in a foreign currency shall not be treated, at any time before 6th April 1986, as a relevant deposit.

(2) A certificate of deposit, as defined in section 55(3) of the [1968 c. 44.] Finance Act 1968, which was issued before 13th March 1984 on terms which provide for interest to be payable on the deposit at any time after 5th April 1985 (whether or not interest is payable on it before that date) shall, if it is not a qualifying certificate of deposit, be treated for the purposes of paragraph 3(3) of this Schedule as if it were a qualifying certificate of deposit.

(3) Any deposit which was made before 6th July 1984 but which is not a qualifying time deposit shall, where it is made on terms which—

(a) do not make provision for the transfer of the right to repayment;

(b) prevent partial withdrawals of, or additions to, the deposit; and

(c) require—

(i) the deposit-taker to repay the sum at the end of a specified period which ends after 5th April 1985 ; or

(ii) in a case where interest is payable only at the time of repayment of the deposit, the deposit-taker to repay the sum on demand or on notice ;

be treated, for the purposes of paragraph 3(3) of this Schedule, as if it were a qualifying time deposit.

(4) A declaration made before 6th July 1984 under section 17(4) of the [1970 c. 9.] Taxes Management Act 1970 which contains an undertaking of the kind referred to in sub-paragraph (4) of paragraph 3 of this Schedule shall, at all times before 6th April 1988, be treated as a declaration made for the purposes of that paragraph.

(5) Where a deposit which is a source of income of any person (the " lender") is not a composite rate deposit but at any time becomes such a deposit, section 121 of the Taxes Act (special rules where source of income ceases) shall apply as if the deposit were a source of income which the lender ceased to possess immediately before it became a composite rate deposit.

(6) Where a deposit becomes a composite rate deposit on 6th April 1985, section 121 of the Taxes Act shall apply in relation to it with the omission from subsection (1)(b) of the words from " and shall" to " this provision ".

(7) Where a deposit which is a source of income of any person ceases to be a composite rate deposit, section 120(3) of the Taxes Act shall apply as if the deposit were a new source of income acquired by him immediately after it ceased to be a composite rate deposit.

(8) For the purposes of sub-paragraphs (5) to (7) above a deposit is at any time a composite rate deposit if, were the person holding it to make a payment of interest in respect of it at that time, he would be liable to account for and pay an amount on that payment under the principal section.

Penalties

7 The Table in section 98 of the [1970 c. 9.] Taxes Management Act 1970 (penalties) shall be amended by inserting at the end of the first column—

“Paragraph 3(3)(h) and (5) of Schedule 8 to the Finance Act 1984”.