Income Tax Act 2007

Manufactured interest

919 Manufactured interest on UK securities: payments by UK residents etc

(1) This section applies if a person who pays manufactured interest as mentioned in section 578(1)—

(a) is UK resident, or

(b) pays the manufactured interest in the course of a trade carried on in the United Kingdom through a branch or agency.

(2) The payer of the manufactured interest must, on making the payment, deduct from the gross amount of the manufactured interest a sum representing income tax on it at the savings rate in force for the tax year in which the payment is made.

(3) The “gross amount” of manufactured interest is equal to the gross amount of the interest of which it is representative.

(4) This section is subject (in particular) to—

• section 583 (manufactured payments exceeding underlying payments),

• section 585 (manufactured payments: power to deal with special cases),

• section 921 (cases where interest on underlying securities paid gross), and

• Chapter 11 (payments between companies etc: exception from duties to deduct).

(5) For provision about the collection of income tax in respect of a payment from which a sum must be deducted under this section—

(a) see Chapter 15 if the payer of the manufactured interest is a company, and

(b) otherwise see Chapter 16.

920 Foreign payers of manufactured interest: the reverse charge

(1) This section applies if a person who pays manufactured interest as mentioned in section 578(1)—

(a) is non-UK resident, and

(b) pays the manufactured interest otherwise than in the course of a trade carried on in the United Kingdom through a branch or agency.

(2) The recipient must account for and pay income tax in respect of the manufactured interest if the recipient—

(a) is UK resident, or

(b) is non-UK resident but receives the manufactured interest for the purposes of a trade carried on by the recipient in the United Kingdom through a branch or agency.

(3) The amount of income tax to be accounted for and paid is equal to the amount of the sum representing income tax which the payer would have been required to deduct under section 919(2) if the payer had been UK resident.

(4) If the payer would not have been required to deduct any sum under section 919(2), the recipient is not required to account for and pay any income tax under this section.

(5) For examples of cases in which subsection (4) applies see (in particular)—

• section 921 (cases where interest on underlying securities paid gross), and

• Chapter 11 (payments between companies etc: exception from duties to deduct).

(6) This section is subject to—

• section 583 (manufactured payments exceeding underlying payments), and

• section 585 (manufactured payments: power to deal with special cases).

(7) Provision about the collection of income tax required to be accounted for and paid under this section may be included in regulations under section 586.

921 Cases where interest on underlying securities paid gross

(1) This section applies to manufactured interest which is representative of interest on—

(a) gilt-edged securities, or

(b) securities which are not gilt-edged securities but on which the interest is payable without deduction of income tax.

(2) Section 919(2) does not require any deduction of a sum representing income tax to be made on the payment of the manufactured interest.

(3) In this section “securities” includes loan stock or any similar security.