Paying tax after receiving gross interests

Ifts

Hungerdunger wrote: »

I've never heard of this before. Can you point us to a couple of examples?

I have come across this type of account before where interest was paid gross on balances over £50,000.
It was a while ago and I cant remember what bank it was, but it did put me off from opening the account.

I did manage to find these example here:

http://www.angloirishbank.co.uk/Personal_Savings/FAQ/FAQ_for_Qualifying_Time_Deposits/

http://www.bankofcyprus.co.uk/Personal-Banking/Bond-Range/Fixed-Term-Bonds/Summary-Box/

Hungerdunger

Ifts wrote: »

I have come across this type of account before where interest was paid gross on balances over £50,000.
It was a while ago and I cant remember what bank it was, but it did put me off from opening the account.

I did manage to find these example here:

http://www.angloirishbank.co.uk/Personal_Savings/FAQ/FAQ_for_Qualifying_Time_Deposits/

http://www.bankofcyprus.co.uk/Personal-Banking/Bond-Range/Fixed-Term-Bonds/Summary-Box/

Thanks for those examples - I've learnt something today.

joerugby

Hungerdunger wrote: »

I'm not saying you're wrong, but I've never heard of this before. Can you point us to a couple of examples?

My wife and I have Natwest 2yr bond accounts that automatically pay gross interest on balances over £50,000

Quite convenient really since she only has interest and dividend income and this is the only way she can take advantage of some of her personal allowance during the year.

markdeer2004

Thanks for the replies.

The one example is HSBC fixed rate bond. Here is the summary on interests:

"Interest is paid gross on deposits of £50,000 or more that are fixed for less than 5 years irrespective of your tax status, and it is your responsibility to declare any tax that may be due (all Fixed Rate Savers will be fixed for less than five years – where the term is five years, the deposit will mature on the working day before the fifth anniversary). "

How can they find out my tax status if I did not supply the bank with my national insurance number. I guess they can try matching it on my name and address to find out if I had paid the tax or not.

Surely if the bank makes the effort to notify inland revenue of those receiving gross interest why don't they deduct the basic tax anyway and save the hassle of me filling in the forms.

Mikeyorks

markdeer2004 wrote: »

How can they find out my tax status if I did not supply the bank with my national insurance number. I guess they can try matching it on my name and address to find out if I had paid the tax or not.

Surely if the bank makes the effort to notify inland revenue of those receiving gross interest why don't they deduct the basic tax anyway and save the hassle of me filling in the forms.

You could turn the question around and ask why you would take out such an account if you don't wish to be responsible for declaring the interest?

Such accounts are 'Qualifying Time Deposits'. They have to meet specific HMRC defined criteria :-

An account is a QTD if the terms and conditions for the account meet the five criteria below:
· the deposit is at least £50,000
· repayment to be made at a specified time within 5 years of the QTD being made
· makes no provision for the right to repayment to be transferred
· prevents partial withdrawals
· prevents additions.

All 'deposit takers' are mandated to make returns to HMRC each year under the TDSI (Tax Deduction Scheme for Interest) scheme. Includes full names / addresses ....... and full details of the account. HMRC put it into a data warehouse and bring together different accounts for the same individual by data matching tools.

Interest paid gross on higher value accounts (either QTD or with an R85 filed) - attract a much higher rating on HMRC risk assessments!

This year's reporting requirements on deposit takers here :-

http://www.hmrc.gov.uk/tdsi/guidance-notes.pdf

cashbackproblems

How would the tax authorities find out, personally i reckon your better off keeping it or giving it to charity if you want. I never have and never would declare anything to the taxman.

Mikeyorks

cashbackproblems wrote: »

How would the tax authorities find out, .

Primarily because deposit takers have to tell them ...... I feel that's easy enough to comprehend? Read the TDSI guidance on the HMRC website and the Reporting criteria under S17 and S18.

Until recently HMRC were accepting reports on paper - they now have an electronic system so that all interest paid goes into their data warehouse. Once they link that into their new PAYE system it will become automatic to do a cross check. If you haven't been declaring it ...... I'd start saving now.

John_Pierpoint

Similar thread here:
https://forums.moneysavingexpert.com/discussion/comment/37259212#Comment_37259212