§ Mr. BurnsTo ask the Chancellor of the Exchequer if he will make a statement about holders of certificates of tax deposits disadvantaged by the introduction of independent taxation.
§ Mr. NelsonThe Government have decided to provide compensation for certain holders of certificates of tax deposit—CTDs—disadvantaged by the introduction of independent taxation of husbands and wives in April 1990.
The Government now propose that anyone who bought a CTD before 6 April 1990 and subsequently cashed it in to pay a spouse's tax liability may apply for a payment equivalent to the difference between the higher and lower interest rates. Effective immediately, anyone still holding a CTD bought before 6 April 1990 will be able to use it to pay his/her own or his/her spouse's liability and receive the higher rate of interest. Legislation to introduce these compensation payments will be included in the next Finance Bill.
CTDs are typically purchased by people or companies in dispute with the Inland Revenue about their tax liabilities. CTD holders receive a higher rate of interest if they use the CTD to pay off their own tax liabilities, and a lower rate if they cash the CTD in instead.
Before 6 April 1990, when independent taxation was introduced, a married couple was treated as single tax unit. So a CTD in one partner's name could be used to pay the tax liability of the couple. Once independent taxation was introduced, tax liabilities were separated. So a CTD in, say, the husband's name could not be used to pay the liability of his wife. Instead, he would have to cash in the CTD, receiving the lower rate of interest.
The test of whether the CTD was cashed in to pay a spouse's liability will be whether any such payment was made within a month either side of the CTD being cashed in.