Annex 1: Minor changes in the law made by the Act: Change 113: Exempt income: Ulster Savings Certificates: section 693
This change gives statutory effect to ESC A34 (certificates encashed after death of registered holder).
Income from Ulster Savings Certificates (USCs) is exempt from income tax if the conditions in section 46(3) and (4) of ICTA are met.
Under section 46(3) of ICTA the exemption does not apply to certificates purchased in excess of the maximum number prescribed by the Department of Finance and Personnel in Northern Ireland. Under section 46(4) of ICTA the holder must be resident and ordinarily resident in Northern Ireland:
	either when the certificates are repaid; or
	where the holder purchased the certificates, at the time of purchase.
So, if the holder did not purchase the certificates, but, say, inherited them, the exemption would apply only if the holder satisfied the residence condition at the time of repayment.
ESC A34 therefore extends the exemption so if the deceased holder of the USCs was resident and domiciled in Northern Ireland at the time the certificates were purchased, but the personal representative, or the beneficiary who inherited the USCs was not, the exemption is still available. It provides­:
“Accumulated interest on Ulster savings certificates held by persons resident and domiciled in Northern Ireland is exempt from income tax (TA 1988 s 46). Where repayment is made after the death of the holder, exemption is allowed if the deceased was resident and domiciled in Northern Ireland at the time of purchase.”
Until 1981, the residence condition for the exemption was that the holder had to be “resident and domiciled” in Northern Ireland (see section 96 of ICTA 1970), although in practice this was interpreted as “resident and ordinarily resident”. The wording of the legislation was amended by section 34 of FA 1981 to bring it into line with the practice. The ESC was introduced in 1958 and has not been amended, so it is still phrased in terms of the pre-1981 legislation, although, in practice, it is now operated in line with the post-1981 wording, so that the reference in the ESC to “domiciled” is read as “ordinarily resident”.
Section 693(4) of this Act gives statutory effect to the concession.
This change is in taxpayers’ favour in principle. But it is expected to have no practical effect as it is in line with current practice.