Income Tax Act 2007

Exceptions from duty to deduct U.K.

875 Interest paid by building societies U.K.

The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest made by a building society [F1 unless it is treated as a payment of yearly interest by virtue of section 874(5A).]

Textual Amendments

F1 Words in s. 875 inserted (with effect in accordance with Sch. 11 para. 12(1) of the amending Act) by Finance Act 2013 (c. 29), Sch. 11 para. 3

[F2 876 Interest paid by deposit-takers U.K.

(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.]

Textual Amendments

F2 S. 876(1)(1A) substituted for s. 876(1) (with effect in accordance with Sch. 6 para. 28 of the amending Act) by Finance Act 2016 (c. 24), Sch. 6 para. 2

877 UK public revenue dividends U.K.

The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest [F3 that is] a UK public revenue dividend [F4 (as defined by section 891)].

Textual Amendments

F3 Words in s. 877 substituted (with effect in accordance with Sch. 6 para. 28 of the amending Act) by Finance Act 2016 (c. 24), Sch. 6 para. 26(a)

F4 Words in s. 877 inserted (with effect in accordance with Sch. 6 para. 28 of the amending Act) by Finance Act 2016 (c. 24), Sch. 6 para. 26(b)

878 Interest paid by banks U.K.

(1) The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest made by a bank if that payment is made in the ordinary course of its business.

[F5 (1A) But that duty does apply to such a payment if it is treated as a payment of yearly interest by virtue of section 874(5A).]

(2) Section 991 (meaning of “bank”) applies for the purposes of this section.

Textual Amendments

F5 S. 878(1A) inserted (with effect in accordance with Sch. 11 para. 12(1) of the amending Act) by Finance Act 2013 (c. 29), Sch. 11 para. 4

Modifications etc. (not altering text)

C1 S. 878 modified (1.1.2010) by The Northern Rock plc (Tax Consequences) Regulations 2009 (S.I. 2009/3227), regs. 1, 7(1)

C2 S. 878 excluded (with effect in accordance with reg. 1(2)(3) of the amending S.I.) by The Taxation of Regulatory Capital Securities Regulations 2013 (S.I. 2013/3209), regs. 1(1), 9(a)

879 Interest paid on advances from banks U.K.

(1) The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest on an advance from a bank if, at the time when the payment is made, the person beneficially entitled to the interest is within the charge to corporation tax as respects the interest [F6 or is a bank that would be within the charge to corporation tax as respects the interest apart from section 18A of CTA 2009].

(2) Section 991 (meaning of “bank”) applies for the purposes of this section.

(3) Subsection (1) applies to the European Investment Bank as if the words from “if” to the end were omitted.

(4) An order under subsection (2)(e) of section 991 designating an international organisation as a bank may provide that subsection (1) applies to the organisation with the modification mentioned in subsection (3).

Textual Amendments

F6 Words in s. 879(1) inserted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 13 paras. 19, 31

880 Interest paid on advances from building societies U.K.

The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest on an advance from a building society.

881 National Savings Bank interest U.K.

The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest on deposits with the National Savings Bank.

882 Quoted Eurobond interest U.K.

The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest on a quoted Eurobond (see section 987).

883 Interest on loan to buy life annuity U.K.

The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest to which section 369 of ICTA applies (interest on loan to buy life annuity payable under deduction of tax).

884 Relevant foreign income U.K.

(1) The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest which is chargeable to income tax as relevant foreign income.

(2) For the meaning of “relevant foreign income”, see section 989.

885 Authorised persons dealing in financial instruments U.K.

(1) The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest made by a person authorised for the purposes of FISMA 2000 if—

(a) the person's business consists wholly or mainly of dealing in financial instruments as principal, and

(b) the payment is made by that person in the ordinary course of that business.

(2) For the meaning of “financial instrument”, see section 984.

Modifications etc. (not altering text)

C3 S. 885 excluded (with effect in accordance with reg. 1(2)(3) of the amending S.I.) by The Taxation of Regulatory Capital Securities Regulations 2013 (S.I. 2013/3209), regs. 1(1), 9(b)

886 Interest paid by recognised clearing houses etc U.K.

(1) The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest made by a [F7 relevant entity] if—

(a) the [F8 relevant entity] is carrying on business as the provider of a central counterparty clearing service [F9 or as a central securities depository], and

(b) the interest is paid in the ordinary course of that business, on margin or other collateral deposited with it by users of the service [F10 or as a central securities depository].

(2) The duty to deduct a sum representing income tax under section 874 does not apply to interest treated by virtue of section 607 (treatment of price differences under repos)[F11 , or paragraph 5 of Schedule 13 to FA 2007 (relief for borrower for finance charges in case of debtor repos and debtor quasi-repos),] as paid by [F12 a relevant entity] in respect of contracts made by it as the provider of a central counterparty clearing service [F13 or as a central securities depository] .

(3) In this section—

• “central counterparty clearing service” means the service provided by [F14 a relevant entity] to the parties to a transaction where there are contracts between each of the parties and [F14 the relevant entity] (in place of, or as an alternative to, a contract directly between the parties), and

• [F15 “relevant entity”, means any of the following (as defined for the purposes of FISMA 2000 by section 285 of that Act)—

  (a)

  a recognised clearing house;

  (b)

  a recognised investment exchange;

  (c)

  F16 ...

  (d)

  a third country central counterparty.

  (e)

  [F17 a recognised CSD;

  (f)

  F16 ...

  (g)

  a third country CSD.]]

• F18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F7 Words in s. 886(1) substituted (1.4.2013) by The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) Regulations 2013 (S.I. 2013/504), regs. 1(2), 24(2)(a)(i) (with regs. 52-58)

F8 Words in s. 886(1)(a) substituted (1.4.2013) by The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) Regulations 2013 (S.I. 2013/504), regs. 1(2), 24(2)(a)(ii) (with regs. 52-58)

F9 Words in s. 886(1)(a) inserted (28.11.2017) by The Central Securities Depositories Regulations 2017 (S.I. 2017/1064), reg. 1, Sch. para. 12(a)(i) (with regs. 7(4), 9(1))

F10 Words in s. 886(1)(b) inserted (28.11.2017) by The Central Securities Depositories Regulations 2017 (S.I. 2017/1064), reg. 1, Sch. para. 12(a)(ii) (with regs. 7(4), 9(1))

F11 Words in s. 886(2) inserted (with effect in accordance with art. 3 of the commencing S.I.) by Finance Act 2007 (c. 11), s. 47(4), Sch. 14 para. 24; S.I. 2007/2483, art. 3

F12 Words in s. 886(2) substituted (1.4.2013) by The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) Regulations 2013 (S.I. 2013/504), regs. 1(2), 24(2)(b) (with regs. 52-58)

F13 Words in s. 886(2) inserted (28.11.2017) by The Central Securities Depositories Regulations 2017 (S.I. 2017/1064), reg. 1, Sch. para. 12(b) (with regs. 7(4), 9(1))

F14 Words in s. 886(3) substituted (1.4.2013) by The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) Regulations 2013 (S.I. 2013/504), regs. 1(2), 24(2)(c)(i) (with regs. 52-58)

F15 Words in s. 886(3) inserted (1.4.2013) by The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) Regulations 2013 (S.I. 2013/504), regs. 1(2), 24(2)(c)(iii) (with regs. 52-58)

F16 Words in s. 886(3) omitted (31.12.2020) by virtue of The Financial Services (Miscellaneous) (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/710), regs. 1(3), 4 (with reg. 39) (as amended by S.I. 2020/1301, regs. 1, 3, Sch. para. 43(l)); 2020 c. 1, Sch. 5 para. 1(1)

F17 Words in s. 886(3) inserted (28.11.2017) by The Central Securities Depositories Regulations 2017 (S.I. 2017/1064), reg. 1, Sch. para. 12(c) (with regs. 7(4), 9(1))

F18 Words in s. 886(3) omitted (1.4.2013) by virtue of The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) Regulations 2013 (S.I. 2013/504), regs. 1(2), 24(2)(c)(ii) (with regs. 52-58)

Modifications etc. (not altering text)

C4 S. 886 modified (temp.) (31.12.2020) by The Financial Services (Miscellaneous) (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/710), regs. 1(3), 39; 2020 c. 1, Sch. 5 para. 1(1)

887 [F19 Payments made by registered societies] U.K.

(1) The duty to deduct a sum representing income tax under section 874 does not apply to either of the following payments if they are payable to a person whose usual place of abode is in the United Kingdom—

(a) a payment of interest made by a [F20 registered society] in respect of any mortgage, loan, loan stock or deposit, or

(b) any interest, dividend, bonus or other sum payable to a shareholder of such a society by reference to the amount of the shareholder's holding in the share capital of the society.

(2) A [F21 registered society] must, within 3 months after the end of each of its accounting periods, deliver to an officer of Revenue and Customs a return containing the information mentioned in subsection (3).

(3) That information is—

(a) the name and place of residence of every person to whom the society has, as a result of this section, made one or more payments in the period amounting in total to at least £15 without deducting a sum (or sums) representing income tax, and

(b) the amount so paid in the period to each of those persons.

(4) See [F22 section 500(2) of CTA 2009] as to the consequences of not making a return as required by subsection (2).

[F23 (5) In this Chapter “registered society” means—

(a) a registered society within the meaning of the Co-operative and Community Benefit Societies Act 2014,

(b) a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969.

(c) a society registered as a credit union under the Credit Unions (Northern Ireland) Order 1985 (S.I. 1985/1205 (N.I. 12)), or

(d) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society.]

(6) For the purposes of this section crediting interest (or amounts treated as interest) counts as paying it.

Textual Amendments

F19 S. 887 heading substituted (1.8.2014) by Co-operative and Community Benefit Societies Act 2014 (c. 14), s. 154, Sch. 4 para. 110(2) (with Sch. 5)

F20 Words in s. 887(1)(a) substituted (1.8.2014) by Co-operative and Community Benefit Societies Act 2014 (c. 14), s. 154, Sch. 4 para. 110(3) (with Sch. 5)

F21 Words in s. 887(2) substituted (1.8.2014) by Co-operative and Community Benefit Societies Act 2014 (c. 14), s. 154, Sch. 4 para. 110(4) (with Sch. 5)

F22 Words in s. 887(4) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 307 (with Sch. 9 paras. 1-9, 22)

F23 S. 887(5) substituted (1.8.2014) by Co-operative and Community Benefit Societies Act 2014 (c. 14), s. 154, Sch. 4 para. 110(5) (with Sch. 5) (as amended (1.8.2014) by Finance Act 2014 (c. 26), Sch. 39 paras. 11, 15)

888 Statutory interest U.K.

The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest made by virtue of the contractual term implied by section 1(1) of the Late Payment of Commercial Debts (Interest) Act 1998 (c. 20) (statutory interest).

[F24 888A Qualifying private placements U.K.

(1) The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest on a qualifying private placement.

(2) “Qualifying private placement” means a security—

(a) which represents a loan relationship to which a company is a party as debtor,

(b) which is not listed on a recognised stock exchange, and

(c) in relation to which such other conditions as the Treasury may specify by regulations are met.

(3) The conditions which may be specified under subsection (2)(c) include conditions relating to—

(a) the security itself,

(b) the loan relationship represented by the security,

(c) the terms on which, or circumstances under which, the security or loan relationship is entered into,

(d) the company which is party to the loan relationship as debtor,

(e) any person by or through whom a payment of interest on the security is made, or

(f) the holder of the security.

(4) Regulations under this section may make provision about the consequences of failing to make a deduction under section 874, in respect of a payment of interest on a security, in cases where the person required to make the deduction had a reasonable, but mistaken, belief that the security was a qualifying private placement.

(5) Regulations under this section may—

(a) make different provision for different cases;

(b) contain incidental, supplemental, consequential and transitional provision and savings.

(6) In this section “loan relationship” has the same meaning as in Part 5 of CTA 2009.]

Textual Amendments

F24 S. 888A inserted (26.3.2015 for specified purposes, 1.1.2016 in so far as not already in force) by Finance Act 2015 (c. 11), s. 23(1)(2)(3); S.I. 2015/2035, reg. 2

[F25 888B Designated dividends of investment trusts U.K.

The duty to deduct a sum representing income tax under section 874 does not apply to a dividend so far as it is treated as a payment of yearly interest by regulations under section 45 of FA 2009 (dividends designated by investment trust or prospective investment trust).

Textual Amendments

F25 Ss. 888B-888D inserted (with effect in accordance with Sch. 5 para. 5(1) of the amending Act) by Finance Act 2017 (c. 10), Sch. 5 para. 1

888C Interest distributions of certain open-ended investment companies U.K.

The duty to deduct a sum representing income tax under section 874 does not apply to a payment of yearly interest under section 373 of ITTOIA 2005 (in the case of certain open-ended investment companies, payments of yearly interest treated as made where distributable amount shown in accounts as yearly interest).

Textual Amendments

F25 Ss. 888B-888D inserted (with effect in accordance with Sch. 5 para. 5(1) of the amending Act) by Finance Act 2017 (c. 10), Sch. 5 para. 1

888D Interest distribution of certain authorised unit trusts U.K.

The duty to deduct a sum representing income tax under section 874 does not apply to a payment of yearly interest under section 376 of ITTOIA 2005 (in the case of certain authorised unit trusts, payments of yearly interest treated as made where distributable amount shown in accounts as yearly interest).]

Textual Amendments

F25 Ss. 888B-888D inserted (with effect in accordance with Sch. 5 para. 5(1) of the amending Act) by Finance Act 2017 (c. 10), Sch. 5 para. 1

[F26 888DA Payments of interest by a QAHC U.K.

The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest (however the interest arises) by a QAHC (within the meaning of Schedule 2 to FA 2022).]

Textual Amendments

F26 S. 888DA inserted (24.2.2022) by Finance Act 2022 (c. 3), Sch. 2 para. 55

[F27 888E Interest on certain peer-to-peer lending U.K.

(1) The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest on an amount of peer-to-peer lending.

(2) In subsection (1) “peer-to-peer lending” means credit in relation to which the condition in subsection (4) is met.

(3) In this section—

• “original borrower”, in relation to any credit, means the person to whom the credit is originally provided,

• “credit” includes a cash loan and any other form of financial accommodation, and

• “original lender”, in relation to any credit, means the person who originally provides the credit.

(4) The condition is that—

(a) the original borrower and the original lender enter the agreement under which the credit is provided at the invitation of a person (“the operator”),

(b) the operator makes the invitation in the course of, or in connection with, operating an electronic system,

(c) the operator's operation of the electronic system is an activity specified in article 36H(1) or (2D) of the Order (operating an electronic system in relation to lending), and

(d) the operator has permission under Part 4A of FISMA 2000 to carry on that activity.

(5) For the purposes of subsection (4), it does not matter if the agreement mentioned in subsection (4)(a) is not an article 36H agreement (as defined in article 36H of the Order).

(6) The Commissioners for Her Majesty's Revenue and Customs may by regulations make such amendments of the preceding provisions of this section as they consider appropriate in consequence of—

(a) the Order, or any part of it, being replaced (or further replaced) by provision in another instrument, or

(b) any amendment of the Order or any such other instrument.

(7) In this section “the Order” means the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544).]

Textual Amendments

F27 S. 888E inserted (with effect in accordance with Sch. 5 para. 5(2) of the amending Act) by Finance Act 2017 (c. 10), Sch. 5 para. 3