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HMRC internal manual

Company Taxation Manual

HM Revenue & Customs
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Authorised investment funds (AIFs): gross payment of interest distributions: automatic entitlement

Exceptions to obligation to deduct tax - sections 349A and 349B ICTA88

The obligation to deduct tax on making interest distributions is imposed by ICTA88/S349 (2). Where the obligation applies tax is deducted at the lower rate of IT from distributions made (ICTA88/S4 (1A)). However, a number of exceptions are provided by Sections 349A - B. Broadly the conditions that satisfy an exception (as at 1 April 2006) are:

  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,
* an exempt approved superannuation scheme and former approved superannuation funds,
* those other pension and retirement annuity trust schemes which are listed at ICTA88/S349B (3).
  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 lies with a partnership, each member of which is a person or body mentioned in (1) above.