ANNEX 1:: MINOR CHANGES IN THE LAW MADE BY THE BILL This change has no implications for the amount of tax paid, who pays it or when. It affects (in principle and in practice) only administrative matters. Change 127: Deduction of tax: deposit-takers and building societies: definition of relevant investment: sections 851, 856, 858, 859 and 872 Introduction
This change builds on Change 126 (enactment of regulations). It aligns the gross payment category rules for building societies with those for deposit-takers, resulting in a common basis for identifying the payments which are to be subject to deduction of sums representing income tax. This change enables the two regimes to be combined.
Under the source legislation, there is a significant difference in the way the deposit-taker rules and the building society rules identify the payments from which sums representing income tax are potentially to be deducted (subject to the various exceptions). The deposit-taker rules in section 481(4) of ICTA identify four categories (individuals, Scottish partnerships, personal representatives and trustees). But regulation 3 of the Income Tax (Building Societies) (Dividends and Interest) Regulations 1990 (SI 1990/2231) (the building society regulations) imposes an obligation to deduct sums representing income tax in all cases unless the payment falls within the scope of a gross payment category set out in regulation 4 (or the payment is referred to in section 477A(1A) of ICTA).
The reasons for this are historical. The difference of approach no longer achieves anything of substance and makes the essential identity of the two regimes very difficult to discern. The regimes are aligned to the deposit-taker approach (already in primary legislation), this being the simpler of the two.