Income Tax (Trading and Other Income) Act 2005

Chapter 2U.K.Interest

Charge to tax on interestU.K.

369Charge to tax on interestU.K.

(1)Income tax is charged on interest.

(2)The following sections extend what is treated as interest for certain purposes—

• section 372 (building society dividends),

• section 373 (open-ended investment company interest distributions),

• section 376 (authorised unit trust interest distributions),

• section 379 (industrial and provident society payments),

• section 380 (funding bonds), and

• section 381 (discounts).

(3)For exemptions, see in particular—

(a)Chapter 2 of Part 6 (national savings income),

(b)Chapter 3 of Part 6 (income from individual investment plans),

(c)Chapter 4 of Part 6 (SAYE interest),

(d)Chapter 6 of Part 6 (income from FOTRA securities),

(e)sections 749 to [F1756A](interest arising from repayment supplements, tax reserve certificates, damages for personal injury, employees' share schemes, repayments of student loans, the redemption of funding bonds [F2, certain foreign currency securities and interest on certain deposits of victims of National-Socialist persecution)] , and

(f)sections 757 to 767 (interest and royalty payments).

(4)Subsection (1) is also subject to [F3Chapter 3 of Part 12 of ITA 2007 (exemption for interest on securities to which Chapter 2 of that Part applies)] .

370Income chargedU.K.

(1)Tax is charged under this Chapter on the full amount of the interest arising in the tax year.

(2)Subsection (1) is subject to Part 8 (foreign income: special rules).

371Person liableU.K.

The person liable for any tax charged under this Chapter is the person receiving or entitled to the interest.

Other income taxed as interestU.K.

372Building society dividendsU.K.

(1)Any dividend paid by a building society is treated as interest for the purposes of this Act.

(2)In this section “dividend”[F4includes any distribution (whether or not described as a dividend)] .

373Open-ended investment company interest distributionsU.K.

(1)This section applies if the distribution accounts of an open-ended investment company show the total amount available for distribution to owners of shares in the company as available for distribution as yearly interest.

(2)Subsection (1) is subject to [F5subsection (7)] .

(3)For income tax purposes payments of yearly interest are treated as made to the owners of the shares by the company.

(4)F6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)The amount of the payment treated as made to each owner is so much of the total amount mentioned in subsection (1) as is proportionate to the owner's shares.

(6)F6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7)This section does not apply if the open-ended investment company is an approved personal pension scheme.

(8)See section 375 for the interpretation of this section and section 374.

374Date when interest payments under section 373 madeU.K.

(1)This section applies for determining the date on which payments of interest under section 373 are treated as made.

(2)The date on which the payments are treated as made depends on whether a date is specified for any distribution for the distribution period in question by or in accordance with—

(a)the company's instrument of incorporation and its prospectus in issue for the time being (including any supplements), or

(b)in the case of an open-ended investment company which is part of an umbrella company, such parts of those documents of the umbrella company as apply to the open-ended investment company.

(3)If such a date is so specified, the payments are treated as made on that date.

(4)If no such date is so specified, the payments are treated as made on the last day of that period.

375Interpretation of sections 373 and 374U.K.

(1)In sections 373 and 374 and this section—

• “approved personal pension scheme” has the same meaning as in Chapter 4 of Part 14 of ICTA (see section 630(1) of that Act),

• “distribution” includes investment on behalf of an owner of shares in respect of the owner's accumulation shares,

• “distribution accounts” means the accounts showing how the total amount available for distribution to owners of shares is calculated,

• “distribution period” means the period by reference to which that amount is ascertained,

• “the OEIC Regulations” means the Open-ended Investment Companies (Tax) Regulations 1997 (S.I. 1997/1154),

• “open-ended investment company” has the same meaning as in Chapter 3 of Part 12 of ICTA (unit trust schemes etc.) (see section 468(10) and (11) of ICTA, as inserted by regulation 10 of the OEIC Regulations),

• “owner of shares” has the same meaning as in that Chapter (see section 468(10) and (15) of that Act, as so inserted), and

• “umbrella company” has the same meaning as in section 468 of that Act (see section 468(18), as so inserted).

(2)In subsection (1) “accumulation share” means a share in respect of which income is credited periodically to the capital part of the company's scheme property.

(3)In subsection (2) “scheme property” has the same meaning as in Chapter 3 of Part 12 of ICTA (unit trust schemes etc.) (see section 468(10) and (13) of ICTA, as inserted by regulation 10 of the OEIC Regulations).

376Authorised unit trust interest distributionsU.K.

(1)This section applies if the distribution accounts of an authorised unit trust show the total amount available for distribution to unit holders as available for distribution as yearly interest.

(2)Subsection (1) is subject to [F7subsection (7)] .

(3)For income tax purposes payments of yearly interest are treated as made to the unit holders.

(4)F8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)The amount of the payment treated as made to each unit holder is so much of the total amount mentioned in subsection (1) as is proportionate to the unit holder's rights.

(6)F8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7)This section does not apply if the authorised unit trust is an approved personal pension scheme.

(8)See section 378 for the interpretation of this section and section 377.

377Date when interest payments under section 376 madeU.K.

(1)This section applies for determining the date on which payments of interest under section 376 are treated as made.

(2)The date on which the payments are treated as made depends on whether a date is specified by or in accordance with the trust's terms for any distribution for the distribution period in question.

(3)If such a date is so specified, the payments are treated as made on that date.

(4)If no such date is so specified, the payments are treated as made on the last day of that period.

378Interpretation of sections 376 and 377U.K.

In sections 376 and 377—

• “approved personal pension scheme” has the same meaning as in Chapter 4 of Part 14 of ICTA (see section 630(1) of that Act),

• “distribution” includes investment on behalf of a unit holder in respect of the holder's accumulation units,

• “distribution accounts” means the accounts showing how the total amount available for distribution to unit holders is ascertained, and

• “distribution period” means the period by reference to which that amount is ascertained.

379Industrial and provident society paymentsU.K.

(1)Any dividend, bonus or other sum payable to a shareholder in—

(a)a registered industrial and provident society, or

(b)a UK agricultural or fishing co-operative,

is treated as interest for income tax purposes if it is payable by reference to the amount of the shareholder's holding in its share capital.

(2)In subsection (1)—

• “registered industrial and provident society” means a society registered or treated as registered under the Industrial and Provident Societies Act 1965 (c. 12) or the Industrial and Provident Societies Act (Northern Ireland) 1969 (c. 24 (N.I.)), and

• “UK agricultural or fishing co-operative” means a co-operative association—

  (a)

  which is established in the United Kingdom and UK resident, and

  (b)

  whose primary object is assisting its members in—

  (i)

  carrying on agricultural or horticultural businesses on land occupied by them in the United Kingdom, or

  (ii)

  carrying on businesses consisting in the catching or taking of fish or shellfish.

(3)In subsection (2) “co-operative association” means a body with a written constitution from which the Secretary of State considers that it is in substance a co-operative association.

(4)For the purposes of subsection (3), the Secretary of State must have regard to the way in which the body's constitution provides for its income to be applied for its members' benefit and all other relevant provisions.

(5)In Northern Ireland subsections (3) and (4) apply with the substitution for “the Secretary of State” of “ the Department of Agriculture and Rural Development” ”.

380Funding bondsU.K.

(1)This section applies to the issue of funding bonds to a creditor in respect of a liability to pay interest on a debt incurred by a government, public institution, other public authority or body corporate.

(2)The issue is treated for income tax purposes as if it were the payment of so much of that interest as equals the market value of the bonds at their issue.

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

381DiscountsU.K.

(1)All discounts, other than discounts in deeply discounted securities, are treated as interest for the purposes of this Act.

(2)In this section “deeply discounted securities” means securities to which Chapter 8 of this Part applies (profits from deeply discounted securities).