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HMRC internal manual

Corporate Finance Manual

Other tax rules on corporate finance: deduction of tax: accounting for tax deducted and audits

Accounting for tax deducted

The bank, or other deposit-taker, accounts for basic rate tax deducted from interest on relevant deposits under the normal CT61 procedure - see CTM35050. ITA07/PT15/CH15 applies to interest on relevant deposits:

  • even if the deposit-taker is not resident in the UK, and
  • even if the deposit-taker is not a company.

The statutory authority for this is ITA07/PT15/CH15. For the purposes of Part 15, crediting interest to an account is the same as paying it.


Savings & Audit (Saving Scheme Office) periodically audits a sample of accounts to check that deposit-takers are deducting the right amount of tax at the right time, and that gross payment of interest is only being made where it is permitted by law. The audit includes consideration of the deposit-taker’s systems and controls, a check of the calculation of the sum of basic rate tax shown on the quarterly CT61(Z) return, and a sample check of accounts where tax is not being deducted, either because the investor has declared themselves to be not ordinarily resident in the UK, or because form R85 is held.

HMRC staff who examine the accounts of banks and other deposit-takers should refer to SSO any questions or problems that arise concerning the operation of the tax deduction scheme.