Annex 1: Minor Changes in the Law Change 62: Relationships treated as loan relationships etc: Industrial and provident society payments treated as interest under loan relationship: section 499 IPSs other than agricultural cooperative societies
All interest which, regardless of section 486 of ICTA, would fall to be brought into account under Chapter 2 of Part 4 of FA 1996 (“natural interest”), other than interest in respect of loan relationships of a co-operative society is chargeable under that Chapter but (arguably) solely as Schedule D Case III income.
All dividends etc which are only treated as income under a loan relationship by virtue of section 486(1) of ICTA are chargeable under Chapter 2 of Part 4 of FA 1996 but solely as Schedule D Case III income. Regardless of whether section 486(4) of ICTA applies to such income or not, there is no underlying loan relationship to fall within section 80(2) of FA 1996 and the income is chargeable under Case III by virtue of section 80(3) of FA 1996. Crown Option cannot apply in this case since the charge can only be to Schedule D Case III. (Crown Option is the right given by paragraph 84 of Schedule 18 to FA 1998 to an officer of Revenue and Customs to choose between different cases of Schedule D.)