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Income tax and interest: consultation

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HMRC is consulting on proposals changes to the taxation of interest received, and rules on the deduction of tax from interest paid. Comments are invited by 22 June 2012 on:

  • a new rule to determine the interest component in compensation payments;
  • new rules to provide for deduction of tax at source from the interest component in compensation payments;
  • abolition of the concept of ‘yearly interest’, and a change to the meaning of the term ‘yearly interest arising in the UK’, in relation to deduction of income tax;
  • a change to the exemption from the requirement to deduct tax from quoted Eurobonds for certain intra-group transactions;
  • a new rule to put the tax treatment of ‘interest in kind’ beyond doubt; and
  • a new ‘disguised interest’ rule to address income tax avoidance in relation to interest.