What does section 852 of the Income Tax Act 2007 do?

Section 852 gives HMRC the power to make regulations that disapply section 851, which normally requires tax to be deducted at source from interest payments. Where prescribed conditions are met, interest can be paid gross without deduction of basic rate income tax, benefiting non-taxpaying UK residents.

Who benefits from the regulations made under section 852?

UK resident individuals who are not liable to income tax benefit most from these regulations. By certifying to their bank or building society that they have no income tax liability, they can receive interest payments gross, avoiding the need to reclaim tax deducted at source from HMRC.

What are the key regulations made under section 852?

The principal regulations made under this power and its predecessor provisions are the Income Tax (Deposit-takers) (Interest Payments) Regulations 1990 and the building society regulations. These existing regulations continue to have effect under the general continuity of law provisions within the Income Tax Act 2007.

How does a non-taxpayer receive interest without tax deducted under section 852?

A non-taxpayer completes a certification form, such as form R85, declaring to their deposit-taker or building society that they are not liable to income tax. Once the prescribed conditions in the regulations are satisfied, the institution pays interest gross without deducting basic rate income tax at source.

Income Tax Act 2007 section 852

Power to make regulations disapplying section 851

Section 852 allows HMRC to make regulations that switch off the duty to deduct income tax from interest payments where certain conditions are met.

HMRC may make regulations disapplying the obligation to deduct tax at source from interest payments under section 851.
The regulations apply where prescribed conditions are satisfied, such as where the recipient has certified they are not liable to income tax.
This enables UK resident individuals who are not liable to income tax to receive interest payments gross, without tax being deducted.
Existing regulations made under earlier legislation (covering both deposit-takers and building societies) continue in force under this provision.

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