SAIM2400 - Interest: taxation of interest: the tax charge

바카라 사이트˜Interest arising바카라 사이트™

The tax charge under ITTOIA05/S370 is on the full amount of the interest arising in the tax year. The word 바카라 사이트˜arising바카라 사이트™ has been the subject of a number of tax cases. It includes received and also credited to a bank account (Parkside Leasing v Smith (1984) 58TC282). It has a wider meaning than this. In Dunmore v McGowan (1978) (52TC307) it was held to include the 바카라 사이트˜swelling of a person바카라 사이트™s assets바카라 사이트™ even where the person had no immediate right to the income. See the examples at SAIM2440.

Who is taxable on interest?

Under ITTOIA05/S371, the person liable to tax on interest is the person receiving or entitled to the income.

Generally, the person liable to tax will be the person who is entitled to the interest - the beneficial owner of the interest-bearing account or other source of interest. Under ITA07/S10, an individual is charged at the savings rate on the interest (by virtue of ITA07/S12) if that person is only liable at basic rate, or at higher rate if their income is above the basic rate limit.

A person may be taxable on interest even if they cannot withdraw and spend the money. This is again illustrated by the case of Dunmore v McGowan (52TC307), where the taxpayer could not withdraw interest credited to a deposit account because the account had been charged as security for a business guarantee. It was held that the interest nevertheless was taxable - it 바카라 사이트˜enured to the benefit바카라 사이트™ of Mr Dunmore, because it would go towards discharging his liability even if he was called upon to pay under the guarantee.

This view was upheld in Coxon v Revenue and Customs Commissioners (2013) UK FTT/12(TC) where interest accruing on money in an escrow account which was intended to fund the purchase of an overseas property was held to represent taxable income of the buyer, despite the fact that the bank which had provided the purchase monies had retained the interest under a charge it had over the escrow account.

If an individual is unable to withdraw or have access to the interest when it is credited to their account, or has a specific product such as a bond, the interest will not arise and therefore they will not be taxable until they have access to the interest. HMRC staff should seek advice from BAI (Financial Products Team) where there is doubt about whether or not someone is entitled to interest.

A person 바카라 사이트˜receiving바카라 사이트™ interest

The 바카라 사이트˜receiving바카라 사이트™ leg of ITTOIA/S371 comes into play only where someone receives the interest as an agent or bare trustee for another person. For example, in the case of Aplin v White (49TC93), an estate agent was held to be taxable on interest from clients바카라 사이트™ money held in a deposit account, although he did not have to account to his clients for the interest.

In practice, it is only in exceptional circumstances that HMRC would argue that an agent or nominee is chargeable to tax on interest - see examples at SAIM2410. In such a case, the person receives the income in a representative capacity and not because they are beneficially entitled to it. It is not their income as an individual and under ITA07/S11 tax is charged only at the basic (and not the higher) rate, and because the income is interest, the savings rate applies by virtue of ITA07/S12.