Income Tax Act 2007 section 876

Interest paid by deposit-takers

Section 876 provides an exemption from the general duty to deduct income tax at source when interest is paid by a deposit-taker on a relevant investment.

• Interest paid by a deposit-taker (such as a bank or building society) on a relevant investment is exempt from the usual duty to deduct income tax at source under section 874.
• Both conditions must be met: the payer must be a deposit-taker, and the investment must qualify as a relevant investment at the time the payment is made.
• The definitions of "deposit-taker", "investment" and "relevant investment" are found in Chapter 2 of Part 15 of the Income Tax Act 2007.
• This exemption exists because interest from deposit-takers is dealt with under a separate regime (Chapter 2), which has its own rules for deduction of tax, including provisions for non-UK resident declarations and cases where there is no liability to income tax.