The Individual Savings Account Regulations 1998

Interest on cash deposits held under a stocks and shares component or insurance component

23.—(1) When in any year, a sum of interest is paid or credited in respect of a cash deposit which is held under a stocks and shares component or insurance component in accordance with regulation 6(4) to (6)—

(a) no relief from tax shall apply to such interest, but

(b) paragraph (2) shall apply, and the amount determined in accordance with that paragraph shall be taken to represent the tax on such interest, in the place of the liabilities to tax which would otherwise arise.

(2) Where this paragraph applies—

(a) the account manager shall pay to the Board an amount representing income tax at the lower rate in force for the year on all sums of interest referred to in paragraph (1) paid or credited in that year; and

(b) any amount so payable—

(i) may be set-off against any repayment in respect of tax due under regulation 25, and subject thereto

(ii) shall be treated as an amount of tax due under an assessment which is final and conclusive and payable not later than 6 months after the end of the year in which the interest was paid or credited.

(3) The interest referred to in paragraph (1) shall in all other respects be regarded as if it were not income for any income tax purposes, and no repayment of tax or amounts representing tax shall be made to the account investor receiving or entitled to such interest.

(4) The reference to interest in paragraph (1), and in regulation 22, includes a reference to any bonus and to a dividend paid or credited in respect of a share account with a building society.