The Income Tax (Building Societies) (Dividends and Interest) Regulations 1990

Explanatory Note

(This note is not part of the Regulations)

These Regulations, made under section 477A(1) of the Income and Corporation Taxes Act 1988 (“the 1988 Act”) and paragraph 16 of Schedule 5 to the Finance Act 1990, prescribe the cases in which a building society is required to deduct income tax from any dividend or interest paid or credited in any year of assessment in respect of shares in, or deposits with or loans to, the society, and to account for and pay income tax deducted to the Board.

The Regulations also specify cases in which payments may be made by a building society without deduction of income tax and make provision for the collection of income tax payable by a society under these Regulations and, in respect of a transitional period, under the Income Tax (Building Societies) Regulations 1986 (S.I. 1986/482) (“the 1986 Regulations”). The Regulations also provide for the making of elections, declarations and certificates by investors as a condition of receiving certain gross payments, for the making of returns by a building society in connection with payments of dividends or interest, and for the furnishing of information to, and inspection of documents by, the Board for the purposes of these Regulations.

Regulation 1 provides for citation, commencement and effect.

Regulation 2 contains definitions.

Regulation 3 prescribes the cases in which a building society shall deduct and account for income tax in respect of payments of dividends or interest.

Regulation 4 specifies payments which may be made without deduction of income tax by a building society and the conditions which are required to be satisfied before certain payments may be made gross.

Regulations 5 to 9 prescribe conditions which, if fulfilled, enable an individual who is ordinarily resident in the United Kingdom to receive payments from a building society without deduction of tax. Regulation 5 together with the Schedule prescribes the conditions relating to the giving and supply of a certificate to the effect that a person beneficially entitled to a payment of a dividend or interest is unlikely to be liable to pay income tax for the tax year in which the payment is made. Regulation 6 prescribes the condition that a certificate given under regulation 5 continues to be valid and specifies the circumstances in which a certificate ceases to be valid. Regulation 7 specifies the consequences of the Board issuing a notice under regulation 6 that tax is to be deducted from payments of dividends or interest in respect of an account held by a person who has given a certificate under regulation 5. Regulation 8 prescribes the condition that payments of dividends or interest which are made in respect of an account of a class which, prior to 6th April 1991, had become obsolete, should in certain circumstances be made under deduction of tax. Regulation 9 prescribes conditions relating to the giving of certificates in connection with joint accounts.

Regulation 10, which imports with modifications the provisions of Schedule 16 to the 1988 Act, provides for the collection of tax in respect of payments of dividends and interest made under deduction of tax pursuant to these Regulations and, in respect of certain transitional payments made under deduction of tax before 6th April 1991, pursuant to the 1986 Regulations.

Regulation 11 makes provision with regard to declarations by investors and certificates from a building society in connection with the making of certain gross payments under regulation 4.

Regulation 12 adapts and extends the provisions of section 17 of the Taxes Management Act 1970 to payments of dividends and interest by building societies. These provisions enable an inspector of taxes to call for returns giving information relating to payments of dividends and interest.

Regulations 13 to 16 provide for the furnishing of information to, and inspection of documents by, the Board in connection with payments of dividends and interest made by building societies without deduction of tax to individuals ordinarily resident in the United Kingdom, or made under deduction of tax pursuant to regulation 3, and prescribe the purposes for which such information may be used.