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HMRC internal manual

Corporate Finance Manual

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HM Revenue & Customs
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Other tax rules on corporate finance: bank and building society dormant accounts: dormant accounts scheme: taxation

The dormant accounts scheme: taxation

The operation of the scheme is intended to be tax neutral and should not create additional tax compliance burdens for either the institutions or their customers.

The Dormant Bank and Building Society Accounts (Tax) Regulations 2011 (SI 2011/22) sets out the tax measures that apply to relevant dormant accounts. A relevant dormant account is defined in FA08/S39(2) as a dormant account the balance of which is to be, or has been, transferred to an authorised reclaim fund or such a fund and one or more charities.

From the time a dormant account first becomes a relevant dormant account to when a repayment claim to the balance of the account is settled, the Regulations switch off:

  • the reporting requirements under TMA70/S17
  • the deduction of tax obligation in ITA07/S851

in respect of that account and any payment of interest in respect of that account.

Where a repayment claim to the balance of a dormant account is settled, all interest paid or credited to the account or included in the balance of the account during and at the end of the relevant dormant period is treated as paid at the time the repayment claim is settled and as paid in respect of a relevant investment for the purposes of ITA07/S851. Tax will, therefore, need to be deducted. ITA07/S874 will not apply to such interest.

For the purposes of TMA07/S17 such interest is also treated as paid at the time the repayment claim is settled and the account is treated as if the bank or building society had retained the balance of it in the ordinary course of its business or trade operations. A notice under section 17 for a year of assessment is deemed to require the inclusion of information for all relevant dormant accounts in respect of which repayment claims were settled in that year.