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The Dormant Bank and Building Societies Bill is expected to be enacted
shortly. This Bill will create the Unclaimed Assets Scheme, whereby
financial institutions will transfer unclaimed assets to the scheme. For
these purposes, unclaimed assets are assets held by financial institutions
in respect of customers where the customer has not made contact for 15
years, although there are certain exceptions. Customers are entitled to
reclaim their assets.
The Finance Bill 2008 is to make legislative changes and introduce powers to
make secondary legislative changes that together will ensure the operation
of the Scheme is tax neutral and does not increase the tax administrative
burden for financial institutions.
A power will be introduced to enable secondary legislative changes to be
made with effect from Royal Assent. These changes will have effect on and
after the date that the Scheme comes into effect.
The first change will amend the obligation for banks and building societies
to deduct 20% income tax at source from certain payments of interest (under
section 851 Income Taxes Act 2007). Deduction at source will only apply to
interest on dormant account balances within the ambit of the Scheme, if and
when, a customer reclaims their dormant account balance.
The second change will amend the reporting obligation for interest payments
by financial institutions (under section 17 Taxes Management Act 1970). The
reporting obligation will only apply to interest on dormant accounts within
the ambit of the Scheme if, and when, a customer reclaims their dormant
account balance and interest thereon.
The third change will ensure that a customer only has an income tax
liability (under section 370 Income Tax (Trading and Other Income) Act 2005)
in respect of the interest arising on their dormant account balances within
the ambit of the Scheme if, and when, they reclaim their deposit and
interest.
An amendment will be made to Taxation of Chargeable Gains Act (TCGA)1992 to
ensure that where dormant accounts within the ambit of the Scheme are
transferred to the body that will administer them under the Scheme, there
will be no disposal for capital gains purposes. A disposal will only occur
if, and when, the customer makes a reclaim of such deposits. This change
will have effect from a date to be appointed by Treasury order, which will
be the same date as when the Scheme comes into effect.
Our view
These are sensible amendments to accommodate the introduction of the
Unclaimed Assets Scheme.
The TCGA amendments primarily relate to non-sterling deposits which are
chargeable assets for capital gains tax purposes. |
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