Building societies, banks and other deposit takers (including
non resident companies trading from a branch or agency in the UK
and, in some cases, local authorities) are required to deduct
income tax at the savings rate in force for the relevant year of
assessment from interest paid or credited to individual depositors.
People who do not expect to have to pay any tax can register
to have their interest paid in full without deduction of tax.
Where tax is deducted, dividends paid by building societies
on share accounts are treated as interest. The regime for
deposit-takers and building societies is laid down in
ITA07/CH2/PT15 supplemented by SI1990/2231, as amended, in the case
of building societies.
These institutions are obliged to account for the amounts
deducted under ITA07/CH15/PT15 using form CT61(Z) (see AC4100).
Entries on these forms giving aggregated figures of interest
paid or credited and the tax deducted for the return period are
acceptable. Dates of payments need not be specified but separate
figures should be shown for pre and post 5 April interest to
reflect any change in the savings rate.
You should check the figures in the returns against those in
or with the accounts. Institutions should provide a reconciliation
of the figures in the CT61(Z) returns with the deductions claimed
in the accounts for these items.
If the Accounts Offices have any points of doubt or
difficulty arising on the forms CT61(Z), they will refer them to
the Inspector dealing with the accounts of the institution
concerned.
Building Societies, banks and other deposit takers are
audited periodically by CAR Audit to ensure that the scheme for
deducting income tax from interest payments is being operated
properly. The audits include checks that the correct amount of tax
is being returned on forms CT61(Z).
