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Finance Act 1951

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23Building societies

(1)The Commissioners of Inland Revenue and any building society may, as respects the year 1952-53 or any subsequent year of assessment, enter into arrangements whereby—

(a)the society is assessed to income tax under Schedule D on such sums (including sums which, apart from the arrangements, would be receivable by the society with tax deducted therefrom) as may be determined under the arrangements, and is so assessed in part at the standard rate and in part at a reduced rate which takes into account the operation of the subsequent provisions of this section; and

(b)property in which the society has an interest is exempt from tax under Schedule A to such extent as may be specified in the arrangements ; and

(c)provision is made for any incidental or consequential matters,

and any such arrangements shall have effect notwithstanding anything in the Income Tax Acts:

Provided that the said Commissioners, in exercising their powers of entering into arrangements under this section, shall at all times aim at securing that the total tax becoming payable to, and not becoming repayable by, the Crown is, when regard is had to the operation of the subsequent provisions of this section, as nearly as may be the same in the aggregate as it would have been if those powers had never been exercised.

(2)Where any such arrangements as aforesaid are in force in the case of any society as respects any year of assessment—

(a)tax shall not be deducted from any dividends or interest payable in that year in respect of shares in or deposits with or loans to that society ; and

(b)no assessment to tax or repayment of tax shall be made in respect of any such dividends or interest on or to the person receiving or entitled to the dividends or interest; and

(c)the amounts actually paid or credited in respect of any such dividends or interest (and no more) shall be treated as income for that year of the person entitled thereto; and

(d)the said amounts (and no more) shall, in applying Rules 19 and 21 of the General Rules to other payments, be treated as profits or gains which have been brought into charge to tax:

Provided that—

(i)any such dividends or interest shall be taken into account for the purposes of assessment to surtax; and

(ii)the amount actually paid or credited in respect of any such dividends or interest shall be deemed for surtax purposes to be a net amount corresponding to a gross amount from which tax at the standard rate for that year has been duly deducted, and the amount on which surtax is to be charged in the case of any person shall be calculated accordingly; and

(iii)the provisions of this subsection shall not apply in relation to interest on any bank loan; and

(iv)the provisions of this subsection shall not apply in relation to any interest which is payable in respect of a loan to the society under a contract made before the beginning of the first year of assessment as respects which the society enters into arrangements under subsection (1) of this section, if and to the extent that, both at the time of the making of the contract and at the time when the interest becomes payable, it is contemplated by the parties that tax shall be deducted on payment of the interest.

(3)Where any such arrangements as aforesaid are in force in the case of any society as respects any year of assessment—

(a)tax shall not be deducted upon payment to the society of any interest on advances, being interest payable in that year; and

(b)any amount which, by virtue of this subsection, is paid without deduction of tax by any person to the society in respect of interest on advances (being interest payable by him to the society in that year) shall, except so much thereof, if any, as is repaid to him by the society, be deducted from or set off against his income for that year, and tax shall be discharged or repaid accordingly,

and subsections (2) and (3) of section fifty-six of the Income Tax Act, 1945 (which relate to the procedure in relation to claims for allowances given under that Act by way of discharge or repayment of tax), shall apply in relation to the discharge or repayment of tax under this subsection as they apply in relation to the allowances mentioned in that section.

(4)Any arrangements made under this section as respects any year of assessment shall, if made after the beginning of that year, be deemed to have come into force at the beginning thereof, and any necessary adjustments shall be made in relation to any sums paid or credited before the date of the making of the arrangements.

(5)If—

(a)as respects the year 1951-52 or any previous year of assessment, any arrangements are made (whether before or after the passing of this Act) between the Commissioners of Inland Revenue and a building society as respects the tax which is to be charged in the case of that society; and

(b)those arrangements purport to provide that no repayment of tax shall be made in respect of income derived from investments with the society; and

(c)as a result of, or in anticipation of, those arrangements, any dividends or interest payable in the year of assessment in question by the society in respect of shares in or deposits with or loans to the society are paid without deduction of tax,

paragraphs (b), (c) and (d) of, and paragraph (i) of the proviso to, subsection (2) of this section shall apply and be deemed always to have applied in relation to those dividends or that interest as they apply in relation to the dividends or interest mentioned in paragraph (a) of the said subsection (2).

(6)In this section—

  • " building society" means a society incorporated under the Building Societies Act, 1874, or such an unincorporated society as is mentioned in section seven of that Act; and

  • " dividend" includes any distribution, whether described as a dividend or otherwise, which, apart from this section, would fall to be treated as a dividend for the purposes of Rule 20 of the General Rules.

(7)This section shall apply in relation to a company within the meaning of the Companies Act, 1948, or the corresponding enactments in force in Northern Ireland, which carries on a business which, in the opinion of the Commissioners of Inland Revenue, is similar to that carried on by a building society as it applies in relation to a building society, except that in subsections (2) and (5) the references to dividends and shares shall be deemed to be omitted.

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