§ Mr. BurnsTo ask the Chancellor of the Exchquer if he will make a statement on the application of the tax deduction at source arrangements to the payment of gross interest to non-residents by deposit-takers.
§ Mr. DorrellThe tax deduction at source legislation provides, generally, that individuals who are not 343W ordinarily resident in the United Kingdom, and who make a declaration to that effect, can receive their interest without deduction of tax. However under existing rules a deposit-taker which is not a bank or a building society is required to deduct tax even when a declaration has been made.
We have decided to remove this inconsistency by including legislation in the next Finance Bill to allow these deposit-takers to pay gross interest on the same footing as banks and building societies.
In the meantime, in anticipation of this legislation, and with my agreement, the Inland Revenue will not seek to recover tax from a deposit-taker which has paid gross interest to someone who is not ordinarily resident in the United Kingdom and has provided the necessary declaration.