840 Government securities held by non-UK resident central banks
(1) No liability to income tax arises in respect of income from securities which is—
(a) income payable out of the public revenue of the United Kingdom, and
(b) income of a bank, or the issue department of a bank, to which this section applies for the time being.
(2) But subsection (1) does not prevent the income from being taken into account in calculating profits, gains or losses of a business carried on in the United Kingdom.
(3) Her Majesty may by Order in Council direct that this section applies to a bank or its issue department if it appears to Her Majesty that the bank—
(a) is non-UK resident, and
(b) is entrusted by the government of a territory outside the United Kingdom with the custody of the territory's principal foreign exchange reserves.
(4) No recommendation may be made to Her Majesty in Council to make an order under this section unless a draft of the order has been laid before and approved by a resolution of the House of Commons.
(1) This section applies if an individual is employed in the United Kingdom as an official agent for—
(a) a country mentioned in Schedule 3 to the British Nationality Act 1981 (c. 61) (which contains a list of Commonwealth countries) or the Republic of Ireland, or
(b) a state or province of a country within paragraph (a).
(2) If conditions A and B are met, the individual is entitled to the same immunity from income tax as that to which a member of the staff of a mission is entitled under the Diplomatic Privileges Act 1964 (c. 81).
(3) Condition A is that the individual has been certified—
(a) to be ordinarily resident outside the United Kingdom, and
(b) to be UK resident solely for the purposes of the individual's functions as an official agent.
(4) The certification must have been done by (as the case may be)—
(a) the High Commissioner of the country for which the individual is an official agent, or
(b) the Agent-General of the state or province for which the individual is an official agent.
(5) In subsection (4)(a) “High Commissioner” includes the head of the mission of the country in question by whatever name called.
(6) Condition B is that the individual's functions as an official agent are not performed in connection with a trade, business or other undertaking carried on for the purposes of profit.
(7) In this section “head of the mission” and “a member of the staff of a mission” are to be read in accordance with the Diplomatic Privileges Act 1964.
842 UK Economic Interest Groupings and European Economic Interest Groupings
(1) The following rules about UK Economic Interest Groupings and European Economic Interest Groupings apply for the purposes of charging income tax—
Rule 1
A grouping is treated as acting as the agent of its members.
Rule 2
The activities of a grouping are treated as those of its members acting jointly.
Rule 3
Each member of a grouping is treated as having a share of the grouping's property, rights and liabilities.
Rule 4
Any trade or profession carried on by the grouping is treated as carried on in partnership by the members of the grouping.
(2) For the purposes of Rule 3, a member's share of any property, rights or liabilities of a grouping is determined according to the contract under which the grouping is established.
(3) If the contract does not provide for this, the member's share is determined by reference to the share of the profits of the grouping to which the member is entitled under the contract.
(4) If the contract does not provide for this either, the members are treated as having equal shares of the property, rights and liabilities of the grouping.
(5) “European Economic Interest Grouping” means a grouping registered in a member State and formed in pursuance of Council Regulation (EEC) No. 2137/85 of 25 July 1985 on the European Economic Interest Grouping as it has effect in EU law.
In calculating a person's income from any source, no deduction is allowed for an annual payment to which section 904 applies (annual payments for dividends or non-taxable consideration).
(1) No provision in letters patent granted by the Crown is to be construed as conferring exemption from income tax.
(2) Subsection (1) applies whether the letters patent are granted before or after the date on which this Act is passed.
(3) Any provision of the letters patent purporting to override the effect of subsection (1) is void.
(1) This section applies if—
(a) securities (“old securities”) of a particular kind are issued by way of an original issue of securities of that kind,
(b) on a later occasion securities (“new securities”) of the same kind are issued,
(c) a sum (“the extra return”) is payable in respect of the new securities by the issuer of them to reflect the fact that interest is accruing on the old securities,
(d) the issue price of the new securities includes an element (whether or not separately identified) representing payment for the extra return, and
(e) the extra return is equal to the amount of interest mentioned in subsection (2).
(2) The amount of interest referred to in subsection (1)(e) is—
(a) the amount of interest payable for the relevant period on so many old securities as there are new, or
(b) if there are more new securities than old, the amount of interest which would be so payable if there were as many old securities as new.
(3) A sum paid or payable by way of the extra return is treated for income tax purposes as if it were paid or payable as interest (so far as it would not be treated in that way apart from this subsection).
(4) No relief for the extra return is to be given to the issuer of the new securities.
(1) This section applies for the purposes of section 845.
(2) Securities are of the same kind if they—
(a) are treated as being of the same kind by the practice of a recognised stock exchange, or
(b) would be so treated if dealt in on a recognised stock exchange.
(3) “The relevant period” is the period—
(a) beginning with the day mentioned in subsection (4), and
(b) ending with the day (“the new issue day”) on which the new securities are issued.
(4) The day referred to in subsection (3)(a) is the day after—
(a) the last (or only) interest payment day before the new issue day, or
(b) if there is no interest payment day before the new issue day, the day on which the old securities are issued.
(5) In subsection (4) “interest payment day” means a day on which interest is payable under the old securities.
(6) “Relief” means relief by way of deduction in calculating amounts of income charged to income tax or in calculating net income.
(1) This Part deals with deduction of income tax at source.
(2) The following Chapters contain duties to deduct sums representing income tax from certain payments—
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) Chapter 3 (certain payments of yearly interest),
(c) Chapter 4 (payments in respect of building society securities),
(d) Chapter 5 (payments of UK public revenue dividends),
(e) Chapter 6 (annual payments and patent royalties),
(f) Chapter 7 (other payments connected with intellectual property),
(g) Chapter 9 (manufactured payments), and
(h) Chapter 10 (non-commercial payments by companies).
(3) Chapters 6 and 7 are subject to Chapter 8 which makes special provision in relation to the deduction of sums representing income tax from royalty payments.
(4) Chapter 11 contains provision disapplying some of the duties to deduct where payments are made between companies etc.
(5) The following Chapters contain further provision in connection with the deduction (or deemed deduction) of sums representing income tax from certain payments (or deemed payments)—
(za) Chapter 2 (interpretation of section 876 in Chapter 3: exception for deposit-takers),
(a) Chapter 12 (funding bonds),
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . and
(c) Chapter 14 (tax avoidance: directions for deductions from payments to non-UK residents).
(6) Chapters 15 to 17 contain provision about the collection of income tax in respect of payments from which sums are required to be deducted (or from which sums are treated as deducted) under the preceding Chapters.
(7) Chapter 18 deals with regimes involving the deduction of income tax at source which apply in the case of—
(a) visiting performers,
(b) non-resident landlords, and
(c) Real Estate Investment Trusts.
(8) Chapter 19 makes general provision for this Part including—
(a) provision about the giving of statements about deduction of income tax,
(b) provision about payments where the recipient is a company or where the payer is a public department, and
(c) exceptions from duties to deduct for payments made by designated international organisations, some payments under derivative contracts and for some payments of interest on foreign currency securities.
(9) The following provisions also deal with deduction of income tax at source—
(a) Part 11 of ITEPA 2003 (Pay As You Earn), and
(b) Chapter 3 of Part 3 of FA 2004 (construction industry scheme).
848 Income tax deducted at source treated as income tax paid by recipient
(1) A sum representing income tax which is deducted (or treated as deducted) under this Part from a payment is treated as income tax paid by the recipient.
(2) The sum is accordingly taken into account under sections 59B and 59D of TMA 1970 (see also paragraph 8 of Schedule 18 to FA 1998) in determining the income tax or corporation tax payable by, or repayable to, the recipient.
(3) But this section does not apply to income tax deducted at source under section 966 (visiting performers) or 971 (non-resident landlords).
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
849 Interaction with other Income Tax Acts provisions
(1) Regulations made under section 7 of TIOPA 2010 (double taxation arrangements: general regulations) make provision disapplying or otherwise affecting duties to deduct under this Part in circumstances where relief is available under double taxation arrangements.
(2) Sections 821 and 822 of ICTA make provision in relation to under-deductions and over-deductions from some payments which are made before the passing of the relevant annual Act imposing income tax and corporation tax.
(3) In accordance with section 783 of ITTOIA 2005 (general disregard of exempt income for income tax purposes), any payment (or part of a payment) which is exempt from income tax as a result of Part 6 of ITTOIA 2005 is ignored for the purposes of the duties under this Part.
This is subject to any express or implied provision to the contrary.
(4) Section 564Q (deduction of income tax at source under this Part) makes provision for Chapters 2 to 5, 12 and 19 to have effect in relation to alternative finance arrangements.
(5) For exceptions from the duties to deduct under Chapters 3, 6, 7, 10 and 14 in connection with the London Olympic Games and Paralympic Games see—
(a) Chapter 6 of Part 3 of FA 2006, and
(b) regulations made under that Chapter.
(1) This Chapter has effect for the purposes of section 876 (duty under section 874 to deduct tax from payments of yearly interest: exception for deposit-takers).
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) Sections 853 to 856 set out some basic concepts, so that—
(a) section 853 defines “deposit-taker” (and section 854 allows the Treasury by order to prescribe persons as deposit-takers),
(b) section 855 defines “investment” and “deposit”, and
(c) section 856 explains which investments are relevant investments.
(4) Section 856 is subject to—
(a) section 857 (which sets out when investments must be treated as relevant and when they may be treated as not relevant), and
(b) sections 863 to 870 (which describe various kinds of investment which are not relevant investments).
(5) Sections 872 and 873 contain supplementary provisions.
(6) For the purposes of this Chapter, crediting interest counts as paying it.
(1) In this Chapter and section 876 “deposit-taker” means—
(a) the Bank of England, or
(b) a person to whom one of the following subsections or section 854 applies.
(2) This subsection applies to a person—
(a) who has permission under Part 4 of FISMA 2000 to accept deposits which are relevant investments, and
(b) who is not—
(i) a building society,
(ii) a society registered within the meaning of the Friendly Societies Act 1974 (c. 46) or incorporated under the Friendly Societies Act 1992 (c. 40),
(iii) a society registered as a credit union under the Co-operative and Community Benefit Societies Act 2014 or the Credit Unions (Northern Ireland) Order 1985 (S.I. 1985/1205 (N.I. 12)), or
(iv) an insurance company within the meaning of section 275 of FA 2004.
(3) This subsection applies to a company as defined in section 1(1) of the Companies Act 2006 (c. 46) —
(a) in respect of which a resolution has been passed by a local authority under—
(i) section 48(3) of the Banking Act 1979 (c. 37), or
(ii) section 103(3) of the Banking Act 1987 (c. 22), and
(b) which is exempt from the prohibition in section 19 of FISMA 2000 on accepting deposits which are relevant investments.
(4) This subsection applies to a local authority.
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) This subsection applies to a person—
(a) who is authorised for the purposes of FISMA 2000, and
(b) whose business consists wholly or mainly of dealing in financial instruments as principal.
For the meaning of “financial instrument”, see section 984.
(1) This section applies to a person who receives deposits in the course of carrying on business or activities and—
(a) is for the time being prescribed by order by the Treasury for the purposes of this section, or
(b) is a member of a class of persons which is for the time being so prescribed.
(2) An order under this section may prescribe a person or class of person—
(a) in relation to all deposits which are relevant investments, or
(b) in relation to deposits which are relevant investments of a kind specified in the order.
(3) If a person is prescribed only in relation to deposits which are relevant investments of a kind specified in the order, the reference in section 876(1)(b) to “relevant investment” is to be read as a reference only to relevant investments of the kind so specified.
(1) In this Chapter, and section 876, “investment” means a deposit with a deposit-taker.
(2) In this Chapter “deposit” means a sum of money paid on terms which mean that it will be repaid (with or without interest)—
(a) on demand, or
(b) at a time or in circumstances agreed by or on behalf of the person who pays it and the person who receives it.
(1) An investment is a relevant investment for the purposes of section 876 if it meets—
(a) the individual interest condition (see subsection (3)),
(b) the Scottish partnership condition (see subsection (4)),
(c) the personal representative condition (see subsection (5)), or
(d) the settlement condition (see subsection (6)).
(2) But an investment is not a relevant investment if any of sections 863 to 870 prevent it from being a relevant investment.
(3) An investment meets the individual interest condition if the only persons beneficially entitled to interest on the investment are individuals.
(4) An investment meets the Scottish partnership condition if—
(a) a Scottish partnership is beneficially entitled to all interest on the investment, and
(b) that partnership consists only of individuals.
(5) An investment meets the personal representative condition if personal representatives are entitled to any interest on the investment and they receive it in that capacity.
(6) An investment meets the settlement condition if all interest on the investment is income arising to the trustees of a discretionary or accumulation settlement and they receive it in that capacity.
For the meaning of “discretionary or accumulation settlement”, see section 873(1).
857 Investments to be treated as being or as not being relevant investments
(1) A deposit-taker ... must treat every investment with it as a relevant investment unless satisfied that the investment is not a relevant investment.
(2) If a deposit-taker ... is satisfied that an investment is not a relevant investment, it may continue to treat the investment as not being a relevant investment until subsection (3) applies.
(3) This subsection applies when the deposit-taker ... has information which can reasonably be taken to indicate that the investment is or may be a relevant investment.
(1) An investment is not a relevant investment if it is a general client account deposit.
(2) An investment is a general client account deposit for the purposes of this section if—
(a) it is a deposit held by a deposit-taker ... in a client account, and
(b) provision made under any enactment requires the person whose account it is to make payments representing interest to some or all of the clients for whom, or on whose account, that person received the sums deposited in the account.
(3) But an investment is not a general client account deposit if the account in which it is held is identified by the deposit-taker ... as one in which sums are held only for one or more particular clients of the person whose account it is.
864 Qualifying uncertificated eligible debt security units
An investment is not a relevant investment if it is a deposit in respect of which a deposit-taker ... has issued a qualifying uncertificated eligible debt security unit (see section 986).
An investment is not a relevant investment if it is a deposit in respect of which a deposit-taker ... has issued a qualifying certificate of deposit (see section 985).
(1) An investment is not a relevant investment if it is a qualifying time deposit made before 6 April 2012.
(2) An investment is a qualifying time deposit for the purposes of this section if—
(a) it is a deposit consisting of a loan of at least £50,000,
(b) the terms of the deposit require its repayment at a specified time within 5 years beginning with the date on which it is made,
(c) those terms do not make provision for the transfer of the right to repayment, and
(d) those terms prevent partial withdrawals of, or additions to, the deposit.
(3) If a deposit is denominated in a foreign currency, subsection (2)(a) has effect as if it referred to an amount which is at least the equivalent in that currency of £50,000 at the time the deposit is made.
(1) An investment is not a relevant investment if it forms part of a premium trust fund of an underwriting or former underwriting member of Lloyd's.
(2) In this section “premium trust fund” has the meaning given in section 184 of FA 1993.
(1) An investment with a deposit-taker is not a relevant investment if—
(a) the deposit-taker is UK resident for income tax purposes or corporation tax purposes, and
(b) the investment is held at a branch of the deposit-taker situated outside the United Kingdom.
(2) An investment with a deposit-taker is not a relevant investment if—
(a) the deposit-taker is non-UK resident for income tax purposes or corporation tax purposes, and
(b) the investment is not held at a branch of the deposit-taker situated in the United Kingdom.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) For the purposes of this section an investment is held at a branch of a deposit-taker ... if the investment is recorded in its books as a liability of that branch.
(1) An investment with a deposit-taker is not a relevant investment if—
(a) it is a loan made by a deposit-taker in the ordinary course of its business or activities,
(b) it is a debt on a security which is listed on a recognised stock exchange, or
(c) it is a debt on a debenture issued by the deposit-taker (see section 1022).
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) The Treasury may by order amend this Chapter for the purposes of providing that investments of a kind specified in the order are, or are not, relevant investments.
(2) An order under this section may amend this Chapter—
(a) in its application to all deposit-takers, or
(b) in its application to such deposit-takers or classes of deposit-taker as the order may specify.
(3) An order under this section may contain incidental, supplemental, consequential and transitional provision and savings.
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) A settlement is a discretionary or accumulation settlement for the purposes of this Chapter if any income arising to the trustees would (unless treated as income of the settlor) be to any extent income within subsection (2) for the tax year in which it arises.
(2) Income is within this subsection so far as it is—
(a) accumulated or discretionary income as defined in section 480 (other than income arising under a charitable trust or an unauthorised unit trust in relation to which regulation 12 of the Unauthorised Unit Trusts (Tax) Regulations 2013 applies), or
(b) an amount of a type set out in section 482 (unless the trust is a unit trust scheme or the amount is income arising under a charitable trust or is excluded by section 481(5)).
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
874 Duty to deduct from certain payments of yearly interest
(1) This section applies if a payment of yearly interest arising in the United Kingdom is made—
(a) by a company,
(b) by a local authority,
(c) by or on behalf of a partnership of which a company is a member, or
(d) by any person to another person whose usual place of abode is outside the United Kingdom.
(2) The person by or through whom the payment is made must, on making the payment, deduct from it a sum representing income tax on it at the savings basic rate in force for the tax year in which it is made.
(3) But see—
(a) sections 875 to 888E as to circumstances in which the duty to deduct a sum under this section is disapplied, and
(b) Chapter 11 (payments between companies etc) for a further exception from the duty to deduct under this section.
(4) See also regulations made under section 17(3) of F(No.2)A 2005 (authorised investment funds)—
(a) for provision treating certain amounts shown in the distribution accounts of authorised investment funds as payments of yearly interest, and
(b) for exceptions from the duty to deduct under this section which would otherwise apply to such payments.
(5) For the purposes of subsection (1) the following are to be treated as payments of yearly interest—
(a) a payment of interest made by a registered society in respect of any mortgage, loan, loan stock or deposit, and
(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.
(5A) For the purposes of subsection (1) a payment of interest which is payable to an individual in respect of compensation is to be treated as a payment of yearly interest (irrespective of the period in respect of which the interest is paid).
(5B) But the Commissioners for Her Majesty's Revenue and Customs may make regulations which provide that subsection (5A) does not apply in the circumstances prescribed in the regulations.
(6) For the purposes of subsection (1)—
(a) a payment made by a company in a fiduciary or representative capacity is not to be treated as a payment made by the company, and
(b) a payment made by a local authority in a fiduciary or representative capacity is not to be treated as a payment made by the local authority.
(6A) In determining for the purposes of subsection (1) whether a payment of interest arises in the United Kingdom no account is to be taken of the location of any deed which records the obligation to pay the interest.
(7) 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 person making the payment is a UK resident company, and
(b) otherwise see Chapter 16.
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 unless it is treated as a payment of yearly interest by virtue of section 874(5A).
(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.
The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest that is a UK public revenue dividend (as defined by section 891).
(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.
(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.
(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 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).