The Friendly Societies (Gilt-edged Securities) (Periodic Accounting for Tax on Interest) Regulations 1999

Explanatory Note

(This note is not part of the Regulations)

These Regulations, which are made under section 51B of the Income and Corporation Taxes Act 1988 (“section 51B”) (inserted by section 78(1) of the Finance Act 1995) and section 121 of the Finance Act 1993, replace and revoke the Friendly Societies (Gilt-edged Securities) (Periodic Accounting for Tax on Interest) Regulations 1996 (S.I. 1996/21) (“the 1996 Friendly Societies Regulations”) and the Friendly Societies (Gilt-edged Securities) (Periodic Accounting for Tax on Interest) (Amendment) Regulations 1997 (S.I. 1997/475) (“the 1997 Amending Regulations”).

The Regulations have effect in relation to payments of interest on relevant gilt-edged securities made without deduction of tax to a friendly society that fall within an accounting period of that friendly society beginning before 1st April 1999 and ending on or after 1st July 1999. These dates reflect the repeal of section 51B in relation to payments of interest on gilt-edged securities falling due on or after 1st April 1999 (section 37 of the Finance Act 1998 and S.I. 1999/619 (C. 16)), and also the fact that the provisions of Schedule 19AB to the Income and Corporation Taxes Act 1988 modified by the Regulations were amended by the Finance Act 1996 and subsequent Finance Acts in relation to accounting periods ending on or after 1st July 1999 (the appointed day for corporation tax self assessment).

Section 51B empowers the Treasury to provide by regulations that persons to whom payments of relevant gilt-edged securities are made without deduction of tax shall make periodic returns to an officer of the Commissioners of Inland Revenue. This regulatory power was exercised by the Treasury in the Gilt-edged Securities (Periodic Accounting for Tax on Interest) Regulations 1995 (S.I. 1995/3224) (“the Gilts Regulations”). In relation to cases where payments of interest on relevant gilt-edged securities are made without deduction of tax to companies carrying on pension business, the regulatory power was exercised by the Treasury in the Insurance Companies (Gilt-edged Securities) (Periodic Accounting for Tax on Interest) Regulations 1995 (S.I. 1995/3223) (“the 1995 Insurance Companies Regulations”).

The 1995 Insurance Companies Regulations are replaced by the Insurance Companies (Gilt-edged Securities) (Periodic Accounting for Tax on Interest) Regulations 1999 (S.I. 1999/623) (“the 1999 Insurance Companies Regulations”) in relation to payments of interest on relevant gilt-edged securities made without deduction of tax that fall within an accounting period of an insurance company beginning before 1st April 1999 and ending on or after 1st July 1999.

Section 121 of the Finance Act 1993 empowers the Treasury to provide by regulations for Schedule 19AB to the 1988 Act (“Schedule 19AB”) to have effect in relation to the tax exempt business of a friendly society as it has effect in relation to the pension business of an insurance company; and the Friendly Societies (Provisional Repayments for Exempt Business) Regulations 1993 (S.I. 1993/3112) (“the 1993 Friendly Societies Regulations”) provided for Schedule 19AB to have such effect (subject to certain modifications and exceptions). The 1993 Friendly Societies Regulations are replaced by the Friendly Societies (Provisional Repayments for Exempt Business) Regulations 1999 (S.I. 1999/622) (“the 1999 Friendly Societies Regulations”) in relation to accounting periods of friendly societies ending on or after 1st July 1999.

The 1996 Friendly Societies Regulations (as amended by the 1997 Amending Regulations) modified the 1993 Friendly Societies Regulations in relation to cases where payments of interest on relevant gilt-edged securities are made without deduction of tax to friendly societies carrying on tax exempt business. For the reasons mentioned above, these Regulations replace the 1996 Friendly Societies Regulations and the 1997 Amending Regulations in relation to an accounting period of a friendly society beginning before 1st April 1999 and ending on or after 1st July 1999.

Regulation 1 provides for citation, commencement and effect, and regulation 2 for interpretation.

Regulation 3 contains the basic rule that, notwithstanding the provisions of the Gilts Regulations, a friendly society carrying on both tax exempt business and business other than tax exempt business shall not be required to include in its return for any return period the amount of tax on the amount of excess gilt interest received which is referable to the society’s tax exempt business. The amount of tax must be identified in a claim made by the specified date.

Regulation 4 provides that the 1999 Friendly Societies Regulations shall have effect, in relation to cases where payments of interest on relevant gilt-edged securities are made without deduction of tax to friendly societies carrying on tax exempt business, with the modifications specified in regulations 5 to 8.

Regulations 5 to 8 modify the 1999 Friendly Societies Regulations.

Regulation 9 revokes the 1996 Friendly Societies Regulations and the 1997 Amending Regulations.