Introduction Interest in kind
6.Paragraph 6 inserts a new section 370A into the Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005). The new section provides a rule to determine how interest paid in kind in the form of goods, services or vouchers is to be valued
7.Paragraphs 7, 8 and 11 amend section 380 of ITTOIA 2005, section 939 ITA 2007 and section 413 of the Corporation Tax Act 2009 (CTA 2009) respectively to exclude interest in kind from the definition of a funding bond for income tax and corporation tax. The amendments make it clear that the legislative provisions applying to funding bonds and interest in kind are mutually exclusive.
8.Paragraph 9 amends section 975 of ITA 2007 to ensure that the duty to issue a statement under that section only applies if new section 975A of ITA 2007 does not apply.
9.Paragraph 10 inserts a new section 975A into ITA 2007. The new section requires a person who pays interest in kind, or in the form of funding bonds where the issuer is under an duty to retain bonds under section 939 ITA 2007, to provide the recipient with a statement in writing. The statement must show the amount of the interest paid in kind or as a funding bond, the amount of tax deducted (if any), the net amount paid, and the date of payment.
10.Unlike the similar requirement in section 975 ITA where interest is paid in cash, a statement under new section 975A will be required in any case when any interest is paid in kind or by funding bonds where bonds must be retained, not just if the recipient requests it.
11.New section 975A will not apply to a payment of interest by funding bonds where there is no requirement on the issuer to deduct a sum representing income tax from the payment.
12.Paragraph 12 sets out the commencement provisions which, for building societies and other institutions such as banks paying interest on compensation payments, relate to the quarterly returns made by such institutions in respect of tax deducted from interest. Other changes made by the Schedule have effect from the date of Royal Assent.