Income Tax (Trading and Other Income) Act 2005

Interest only income

749 Interest paid under repayment supplements

No liability to income tax arises in respect of interest paid under—

(a) section 824 of ICTA (repayment supplements: individuals and others), or

(b) section 283 of TCGA 1992 (repayment supplements).

750 Interest from tax reserve certificates

No liability to income tax arises in respect of interest from tax reserve certificates issued by the Treasury.

751 Interest on damages for personal injury

(1) No liability to income tax arises in respect of interest on damages for personal injury or death if—

(a) it is included in a sum awarded by a court,

(b) it does not relate to the period between the making and satisfaction of the award, and

(c) in the case of an award by a court in a country outside the United Kingdom, it is exempt from any charge to tax in that place.

(2) No liability to income tax arises in respect of interest if—

(a) it is included in a payment in satisfaction of a cause of action (including a payment into court), and

(b) it would fall within subsection (1) if it were included in a sum awarded by a court in respect of a cause of action.

(3) In subsection (1)—

• “damages” in Scotland includes solatium, and

• “personal injury” includes disease and impairment of physical or mental condition.

752 Interest under employees' share schemes

(1) This section applies if—

(a) a scheme is set up to comply with section 153(4)(b) of the Companies Act 1985 (c. 6) or Article 163(4)(b) of the Companies (Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)) (financial assistance for the purposes of an employees' share scheme), and

(b) under the scheme the trustees receive interest from a participant in the scheme.

(2) So far as the scheme requires the trustees to pay to the company an equivalent amount as interest, no liability to income tax arises under Chapter 2 of Part 4 for the trustees in respect of the interest they receive.

753 Interest on repayment of student loan

(1) No liability to income tax arises in respect of interest if—

(a) it is paid to a person to whom a student loan has been made, and

(b) it relates to an amount repaid to the person after being recovered from the person in respect of the loan.

(2) In this section “student loan” means a loan made under—

• section 22 of the Teaching and Higher Education Act 1998 (c. 30),

• section 73(f) of the Education (Scotland) Act 1980 (c. 44), or

• Article 3 of the Education (Student Support) (Northern Ireland) Order 1998 (S.I. 1998/1760 (N.I. 14)).

754 Redemption of funding bonds

(1) The redemption of funding bonds is not treated as the payment of interest on a debt for income tax purposes if their issue was treated under section 380 of this Act or section 582(1) of ICTA as the payment of interest on the debt.

(2) In this section “funding bonds” includes any bonds, stocks, shares, securities or certificates of indebtedness.

755 Interest on foreign currency securities etc. owned by non-UK residents

(1) This section applies to interest on—

(a) such foreign currency securities issued by a local authority or a statutory corporation as the Treasury direct, and

(b) such foreign currency loans made to a statutory corporation as the Treasury direct.

(2) No liability to income tax arises in respect of interest to which this section applies if—

(a) in the case of interest on a security, its beneficial owner is a non-UK resident, and

(b) in the case of interest on a loan, the person for the time being entitled to repayment or eventual repayment is a non-UK resident.

(3) But interest is not exempt under subsection (2) because a person is a non-UK resident if it is treated as another person’s income under—

• Chapter 5 of Part 5 (settlements: amounts treated as income of settlor), or

• Chapter 3 of Part 17 of ICTA (anti-avoidance provisions: transfer of assets abroad).

(4) In this section—

• “company” means a company, as defined in section 735(1)(a) of the Companies Act 1985 (c. 6) or Article 3(1)(a) of the Companies (Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)),

• “foreign currency”, in relation to loans and securities, has the meaning given by section 756, and

• “statutory corporation” means—

  (a)

  a corporation incorporated by an Act (other than a company), or

  (b)

  any other corporation on which functions connected with carrying on an undertaking are conferred by an Act or by an order made under or confirmed by an Act.

756 Which securities and loans are foreign currency ones for section 755

(1) For the purposes of section 755, a security or loan is a foreign currency one if under its terms the currency to be used for repayment is not sterling.

(2) Subsection (1) is subject to the following qualifications.

(3) A security issued before 6th April 1982 is a foreign currency one if under its terms the currency to be used for repayment is not that of a country specified in Schedule 1 to the Exchange Control Act 1947 (c. 14) at the time of the issue of the security.

(4) A loan made before that date is a foreign currency one if under its terms the currency to be used for repayment is not that of a country specified in that Schedule at the time the loan was made.

(5) If in the case of a security there is an option as to the currency to be used for repayment, the security is only to be treated as a foreign currency one if the option is exercisable only by its holder.

(6) If in the case of a loan there is an option as to the currency to be used for repayment, the loan is only to be treated as a foreign currency one if the option is exercisable only by the person for the time being entitled to repayment or eventual repayment.