Explanatory note

These Regulations make provision for tax on accounts with banks and building societies treated as “dormant accounts” under the Dormant Bank and Building Society Accounts Act 2008 (c. 31). The principal effects of these Regulations are (a) to defer requirements for the deduction from interest of tax, and reporting to H.M. Revenue and Customs, while an account is dormant, (b) to treat all interest credited to the account while dormant as paid or arising at the point (if any) where the customer has reclaimed the account and is repaid the amount in the account and (c) to reapply, except for individual savings accounts (“ISAs”), the deduction of tax and reporting requirements at the point mentioned in (b).

Regulation 1 provides for citation, commencement and effect.

Regulations 2 to 4 (made under the power contained in section 39(1)(a) of the Finance Act 2008 (c. 9) in particular) amend the Income Tax (Interest Payments) (Information Powers) Regulations 1992 (S.I. 1992/15). Regulation 4 postpones the reporting obligations under section 17 of the Taxes Management Act 1970 (c. 9) for dormant accounts (other than ISAs) until a payment in settlement of a repayment claim is made.

Regulations 5 to 7 (made under the power contained in section 39(1)(b) of the Finance Act 2008, in particular) amend the Income Tax (Deposit-takers and Building Societies) (Interest Payments) Regulations 2008 (S.I. 2008/2682). Regulation 7 postpones the obligation under section 851 of the Income Tax Act 2007 (c. 3) (“ITA 2007”) to deduct a sum representing income tax from interest, for dormant accounts (other than ISAs) until a payment in settlement of a repayment claim, and disapplies section 874 of ITA 2007.

Regulation 8 (made under the power in section 39(1)(c) of the Finance Act 2008) provides that, for the purposes of Chapter 2 of Part 4 of the Income Tax (Trading and Other Income) Act 2005 (c. 5) (“ITTOIA 2005”), interest arising on an account while dormant is treated as arising when a payment in settlement of a repayment claim is made.

Regulation 9 (made by the Treasury under the powers in sections 694 to 696, 699 and 701 of ITTOIA 2005) disapplies the information provisions in regulations 30 and 31 of the Individual Savings Account Regulations 1998 (S.I. 1998/1870) while a cash ISA is a dormant account and provides that on a repayment claim, if the balance of the dormant cash ISA is paid back into the same ISA (or another cash ISA with the same manager), it does not count as an ISA subscription.

An Impact Assessment has not been produced for this instrument as it has a negligible impact on business, charities or voluntary bodies.