Receiving Tax Free deposit interest.

John_Pierpoint

The saga of old Mr Dog continues.

http://forums.moneysavingexpert.com/...html?t=1164505

I've sent in the tax return for 07/08; but I am surprised by Lloyds Bank & this is the standard Lloyds Bank, not the Piggott and Dodd branch in some off shore island.

The late Mr Dog had 3 accounts with Lloyds.
A current account linked to a deposit account and some sort of annual bond/tracker account.

The current account and its deposit account both pay interest and the tax year end certificates show tax deducted at 20%.

However the big annual bond/tracker account claims to have paid interest with zero tax taken off.

When I queried this the clerk said "That is because it has a balance of over 50K"

So us ordinary little people have tax deducted at source but the relatively rich get to keep their tax until the tax man asks for it ???

I thought even Luxembourg has to impose a withholding tax of 15% to stay within the European tax laws.

johnllew

And your question is?

John_Pierpoint

How come Lloyds bank can pay gross interest to a taxpayer resident in the UK?

Why cannot we all get it without having to bank in some exotic off shore tax haven.

johnllew

http://www.hmrc.gov.uk/manuals/bamanual/bam44025.htm

BAM44025 - Deduction of tax: relevant deposits

Banks and other deposit-takers must deduct lower rate tax from interest if the deposit is a relevant deposit.

http://www.hmrc.gov.uk/manuals/bamanual/bam44030.htm

BAM44030 - Deduction of tax: deposits that are not relevant deposits

A qualifying time deposit is not a relevant deposit. The definition is at ICTA88/S482 (6), it is a deposit of more than £50,000 (or the foreign currency equivalent) that matures on a specified date, which must be less than 5 years from the date on which the deposit is made. There must be no right to increase the deposit or to make partial withdrawals, and it must be non-assignable. There is an equivalent provision for transferable certificates of deposit (as defined in ICTA88/S56(5)). They are not relevant deposits if the principal is more than £50,000 and the instrument has a maturity of less than 5 years.

John_Pierpoint

Many thanks, very weird.
I wonder if the first 50K is a qualifying deposit for the protection scheme:D