Income Tax Act 2007 section 940

Exception from duty to retain bonds

Section 940 provides an exception from the normal duty to retain funding bonds where it is impracticable for the bond issuer to do so, provided certain information is reported to HMRC.

• Where funding bonds are treated as a payment of interest (deemed interest), the issuer is normally required to retain bonds equivalent to the tax due, but this section applies where retention is impracticable.
• The issuer can be relieved of both the retention duty and the duty to deduct income tax by notifying HMRC of the names, addresses, and bond amounts for each recipient.
• Once the notification is made, the normal income tax collection provisions that would otherwise apply to the deemed interest also fall away.
• The effect is that HMRC can instead pursue the tax directly from the bondholders using the information provided by the issuer.