Annex 1: Minor changes in the law made by the Act: Change 112: Exempt income: savings certificates: unauthorised purchases involving multiple certificates: sections 692(2) and 693(5)
This change enables multiple savings certificates to be regarded as authorised in part where an unauthorised number of certificates has been purchased, and so confers exemption on the income from the part that is so regarded.
The Treasury limit the number of savings certificates of any particular issue that a person is permitted to purchase. The limits are stated in the prospectus for each issue.
The income from savings certificates is exempt from income tax under section 46 of ICTA. However, the exemption only applies to certificates purchased within the permitted limits. Section 46(3) of ICTA provides that the exemption does not apply to savings “... certificates ... purchased ... in excess of the amount which a person is for the time being authorised to purchase ...”. It is not entirely clear how this would work in the case of multiple certificates. (These are certificates which represent a number of individual unit certificates.)
For example, if the maximum number of certificates permitted is 100, X holds 80, and then purchases a multiple certificate of 50, section 46(3) of ICTA appears to prevent the exemption from applying to the second multiple certificate. However, in practice, the second certificate is treated as 50 individual certificates, so that 20 would be treated as authorised and 30 as unauthorised.
Sections 692(2) and 693(5) of this Act reflect this practice by providing that certificates are authorised “so far as” their acquisition was not prohibited by regulations made by the Treasury limiting a person’s holding or, in the case of Ulster Savings Certificates, such regulations made by the Department of Finance and Personnel.
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.