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HMRC internal manual

Company Taxation Manual

From
HM Revenue & Customs
Updated
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Investment trusts: interest distributions: gross interest distributions - automatic entitlement

Exceptions to obligation to deduct tax

The obligation to deduct tax on making interest distributions is imposed by ITA07/S874 (2) (regulation 13 SI2009/2034). Where the obligation applies, tax is deducted at the basic rate of income tax from the interest distribution. However, a number of exceptions are provided within chapter 11 Part 15 ITA 2007, in particular section 933 to 937. Broadly the conditions that satisfy an exception are contained in ITA07/S936:

  1. That the payment is made to, or to the nominee of:
  • a local authority or a health service body
  • a public office or department of the Crown
  • a charity
  • a body that is allowed the same exemption from tax as a charity, the whole income of which is applicable to charitable purposes
  • a scientific research organisation
  • the scheme administrator of a registered pension scheme
  • other pension and retirement annuity trust schemes which are listed at ITA07/S936.
  1. The person to whom the payment is made is, or is the nominee of, the plan manager of a personal equity plan or individual savings account.
  2. The person to whom the payment is made is a society or institution with whom tax- exempt special savings accounts may be held and the payment is received in respect of investments held for the purposes of such accounts.
  3. Beneficial entitlement to the income in respect of which the payment made lies with a partnership, each member of which is a person or body mentioned in (1) above (ITA07/S937).