Fixed rate bonds – interest "on maturity"

priorslee

Does anyone have a fixed rate bond (with a term of more than 1 year) where the interest is paid on maturity only?
(For clarity, I don’t mean where interest is declared annually, added to the bond and then can’t be accessed until maturity. There are accounts offered (eg Oaknorth & Axis banks) which pay interest for the full term in one go at the end of the term.)

If so, have you had anyone trying to tell you that HMRC have changed some rules to make it that the interest MUST be declared on an annual basis?

My reason for asking is that I have a 2 year bond with Close Brothers which I took on the above basis in Jan 2016, but they have just sent me a tax certificate for a years interest for the 2016-17 tax year. They are claiming that the interest basis has been altered ‘due to a change in HMRC rules’ and it now has to be declared annually.

I don’t believe what they are telling me, so would be interested in hearing if anyone else has had the same story.

alanq

The rules did change in 2016-2017 in that interest was paid gross so there will be no tax certificate only perhaps an interest summary for the year.

I am confused - all the Close Brother fixed rate accounts that I have had over several years have required the interest to be paid away annually to a nominated bank account and not added to the account at maturity.

Current terms "Note, interest is accrued daily and is payable annually and at maturity into your nominated bank account."

https://www.closesavings.co.uk/sites/default/files/WEB-FTD-250517_editable.pdf

Sceptic001

priorslee wrote: »

Does anyone have a fixed rate bond (with a term of more than 1 year) where the interest is paid on maturity only?

No, but there was a recent thread with the reverse problem ie. fixed term account holders where interest is credited annually being required to declare the interest in full only on maturity if the money is not deemed by HMRC to be "available for withdrawal" (meaning no early withdrawal/closure allowed).

No definitive answer was forthcoming. All very confusing. :mad:

priorslee

alanq wrote: »

I am confused - all the Close Brother fixed rate accounts that I have had over several years have required the interest to be paid away annually to a nominated bank account and not added to the account at maturity.
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Yes, I've had these in the past too, but the one I have at the moment is different.

It's an odd beast - although the route to it was from Close Savings, it's provided through Close Brothers Asset Management. The way it operates is that the deposit is invested into cash units at a price of £1.00. The unit price increases daily so that it represents 2.25% pa growth over the 2 year term.

All of the documentation at outset described interest being paid at maturity and as it was such an odd beast I spoke to them to check the how it operated (ie interest only "on maturity").

Their story now is is that HMRC have changed the rules so that they have to declare the interest annually. If that is the case they had an obligation to inform me, but my personal view is, for whatever reasons, they decided to offer their fixed terms deposits via this route for a few months. They then realised that it didn't work too well so reverted to the old method.

priorslee

Sceptic001 wrote: »

No, but there was a recent thread with the reverse problem ie. fixed term account holders where interest is credited annually being required to declare the interest in full only on maturity if the money is not deemed by HMRC to be "available for withdrawal" (meaning no early withdrawal/closure allowed).

No definitive answer was forthcoming. All very confusing. :mad:

Thanks - this is interesting, but as you say, very confusing.

As far as I can see from a quick scan of my T&Cs there is no option of early repayment, so it looks slightly more encouraging. I'll wait and see what Close Bros have to say, but at the end of the day I fear I may have to put the question to HMRC.