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HMRC internal manual

Savings and Investment Manual

Deduction of tax: collection arrangements: persons other than companies: direct collection

Collection other than through self assessment

In most cases, collection of income tax from annual payments made by a person other than a company will be achieved via a person’s self assessment (SAIM9160).

Direct collection will not normally be necessary. ITA07/S963 lists a number of cases where this will apply. These include certain building society securities, public revenue dividends and tax avoidance payments. However, the main cases where it will apply are where

  • a person makes a payment of yearly interest, or of a patent or other royalty to a non-UK resident,
  • a person other than an individual makes an annual payment or pays a patent royalty that cannot be covered by collection of tax deducted through the self assessment because the payer has no ‘unrelieved modified total income’ - see SAIM9060.

ITA07/S963 requires the person to deliver an account to HMRC ‘without delay’. There is no statutory time limit for complying with this requirement, and no prescribed form on which details are to be supplied.

In practice, such taxpayers should contact their local tax office and agree a schedule for notifying HMRC of the payments. It will normally be sufficient for the taxpayer to notify the tax office quarterly, by letter or e-mail, of the dates and amounts of interest payments that have been made and the amount of tax that has been deducted. If only small sums are involved, an annual notification may be acceptable.

On receipt of the notification, HMRC may make an assessment in order to bring the tax that has been deducted into charge (ITA07/S963 (3)). The normal rules on assessments apply. Assessments are made through the ‘special assessing’ CODA function (in the case of annual payments) or on a manual assessing set 310 (in the case of interest).