Part 15

Deduction of income tax at source
Chapter 3

Deduction from certain payments of yearly interest

Duty to deduct sums representing income tax

Duty to deduct from certain payments of yearly interest
874
1
This section applies if a payment of yearly interest arising in the United Kingdom is made—
a
by a company,
b
by a local authority,
c
by or on behalf of a partnership of which a company is a member, or
d
by any person to another person whose usual place of abode is outside the United Kingdom.
2
The person by or through whom the payment is made must, on making the payment, deduct from it a sum representing income tax on it at the savings rate in force for the tax year in which it is made.
3
But see—
a
sections 875 to 888 as to circumstances in which the duty to deduct a sum under this section is disapplied, and
b
Chapter 11 (payments between companies etc) for a further exception from the duty to deduct under this section.
4
See also regulations made under section 17(3) of F(No.2)A 2005 (authorised investment funds)—
a
for provision treating certain amounts shown in the distribution accounts of authorised investment funds as payments of yearly interest, and
b
for exceptions from the duty to deduct under this section which would otherwise apply to such payments.
5
For the purposes of subsection (1) the following are to be treated as payments of yearly interest—
a
a payment of interest made by a registered industrial and provident society in respect of any mortgage, loan, loan stock or deposit, and
b
any interest, dividend, bonus or other sum payable to a shareholder of such a society by reference to the amount of the shareholder’s holding in the share capital of the society.
6
For the purposes of subsection (1)—
a
a payment made by a company in a fiduciary or representative capacity is not to be treated as a payment made by the company, and
b
a payment made by a local authority in a fiduciary or representative capacity is not to be treated as a payment made by the local authority.
7
For provision about the collection of income tax in respect of a payment from which a sum must be deducted under this section—
a
see Chapter 15 if the person making the payment is a UK resident company, and
b
otherwise see Chapter 16.