Explanatory note

Section 51A(1) of the Income and Corporation Taxes Act 1988 (“the 1988 Act”), inserted by section 77 of the Finance Act 1995 (“the 1995 Act”), provides that, in certain circumstances, interest on gilt-edged securities shall be paid without deduction of income tax and that the interest so paid shall be chargeable under Case III of Schedule D. Section 51B of the 1988 Act, inserted by section 78(1) of the 1995 Act, provides that the Treasury may by regulations provide that persons to whom payments of interest on gilt-edged securities are made without deduction of tax (“gross payments”) shall make periodic returns to an officer of the Commissioners of Inland Revenue. These Regulations exercise the powers conferred on the Treasury by section 51B of the 1988 Act.

Regulation 1 provides for citation and commencement, and regulation 2 for interpretation.

Regulation 3 specifies the persons (resident and non-resident companies) who are required to make periodic returns in accordance with the Regulations.

Regulation 4 provides for a company to make returns of amounts of any gross payments it receives and of amounts of tax for which it is to be accountable under these Regulations in respect of those payments.

Regulation 5 specifies periods for which returns are to be made; and any such period is called a “return period” in these Regulations. The regulation also provides that a return for any return period specified in this regulation shall be made within 14 days from the end of that period.

Regulation 6 makes provision for the payments which are to be shown in a return made by a resident company; and regulation 7 makes corresponding provision in the case of a non-resident company.

Regulation 8 defines an “amount of excess gilt interest received”, an “amount of excess gilt interest paid” and an “aggregate amount of excess gilt interest received”.

Regulation 9 provides that a company shall be accountable for income tax at the basic rate on the amount of excess gilt interest received for each return period. The regulation also provides that amounts in respect of which there is an obligation to account for tax under these Regulations shall be treated for the purposes of the Tax Acts as payments on which a company has borne income tax by deduction.

Regulation 10 provides that, in certain circumstances, the company may claim that income tax on the aggregate amount of excess gilt interest received shall be set against income tax which it is liable to pay under Schedule 16 to the 1988 Act.

Regulation 11 provides that, in certain circumstances, a company may claim that income tax nominally attributable to an amount of excess gilt interest paid may be set against income tax on amounts for which it is liable to account for previous return periods; and regulation 12 that, in certain circumstances, a company shall carry forward income tax nominally attributable to an amount of excess gilt interest paid to the next return period.

lation 13 provides for a company which is not a building society to make a special return in respect of a special return period which includes the month of March, showing the estimated amount of income tax for which it is accountable under these regulations (“the payment on account”). Regulation 14 makes corresponding provision in the case of a company which is a building society, and also provides for such a company to make a further special reconciliation return.

Regulation 15 provides that income tax set against other tax under these Regulations cannot also be taken into account under section 7(2) or 11(3) of the 1988 Act.

Regulation 16 provides that tax shall be due at the time by which the return is to be made, and makes provision for assessments to be made on a company if an inspector is dissatisfied with a return.

Regulation 17 makes provision relating to collection proceedings in connection with claims made under these Regulations.

Regulation 18 provides for the provisions of the Income Tax Acts to apply to an assessment made under these Regulations.

Regulation 19 makes provision for interest to be payable on certain amounts, and regulation 20 for interest to be paid to a company where the payment on account exceeds the relevant amount of tax due under these Regulations.

Regulation 21 provides that nothing in these Regulations shall prejudice any powers conferred by the Income Tax Acts for the recovery of tax.