What power does section 862 of the Income Tax Act 2007 give to HMRC?

Section 862 gives HMRC officers the authority to inspect declarations made to deposit-takers or building societies by non-resident account holders. These declarations confirm customers' non-resident status, entitling them to receive interest without deduction of income tax. HMRC can select specific declarations for inspection rather than requiring access to all.

How long must deposit-takers and building societies retain non-resident declarations under United Kingdom law?

Deposit-takers and building societies must retain non-resident declarations for at least two years. For deposit-takers, this is required by the Income Tax (Deposit-takers) (Non-residents) Regulations 1992, and for building societies by corresponding regulations. This two-year retention period defines the practical window during which HMRC may exercise its inspection powers.

How did section 862 change HMRC's inspection powers for deposit-takers?

Previously, HMRC could only inspect all declarations held by a deposit-taker or none at all. Section 862 introduced greater flexibility, allowing HMRC officers to select specific declarations for inspection. This more proportionate approach aligned the rules for deposit-takers with those that already applied to building societies under earlier legislation.

What are the declarations that HMRC can inspect under section 862?

The declarations are documents signed by non-resident account holders certifying their non-resident status in the United Kingdom. These declarations allow deposit-takers and building societies to pay interest gross, without deducting income tax. HMRC inspects them to verify that only genuinely entitled individuals receive interest without tax deduction.

Income Tax Act 2007 section 862

Inspection of declarations

Section 862 gives HMRC officers the power to inspect declarations made to deposit-takers or building societies in connection with the payment of interest without deduction of tax to non-residents.

An HMRC officer may inspect any declarations made to a deposit-taker or building society by non-resident account holders
These declarations are the documents by which individuals certify their non-resident status in order to receive interest gross (without tax deducted)
Deposit-takers and building societies are required to retain these declarations for a period of two years, during which time they may be called upon for inspection
This section introduced a minor change in the law for deposit-takers: previously HMRC could only inspect all declarations or none, whereas now they may select specific declarations for inspection

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