PSI17.1.45 - Tax Treatment of Approved Schemes and Payments by Approved Schemes: Tax Treatment of Approved Schemes - Methods of Obtaining Tax Relief - Bank Interest

(This archived guidance relates to HMRC discretionary practice before the 6th April 2006. For current guidance on Registered Pension Schemes see the Registered Pension Schemes Manual)

Banks must deduct tax only from interest on relevant deposits. Deposits by retirement benefit schemes which have applied for approval or have been approved are not relevant deposits and so banks must pay interest on their deposits gross.

Banks treat all deposits as relevant deposits (and therefore pay interest net) until they are satisfied that they are not relevant deposits. There is no specific evidence that the banks need obtain in order to satisfy themselves that a deposit is not a relevant deposit but the Inland Revenue recommends that they obtain documentary evidence which could reasonably be taken to confirm that the investor is a retirement benefit scheme which has applied for approval or has been approved.

If interest is paid net before the bank is satisfied that the deposits are not relevant deposits, the scheme administrator may claim back the tax deducted from the scheme district. But where the bank pays interest net after it has satisfied itself that the investor is a retirement benefit scheme which has applied for approval or has been approved then it must put its mistake right. It does this by recrediting the tax deducted in error to the account and including the refund as an adjustment in its next CT61 return.

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