CFM71050 - Other tax rules on corporate finance: bank and building society dormant accounts: dormant accounts scheme: taxation

The dormant accounts scheme: taxation

The operation of the scheme is intended to be tax neutral and should not create additional tax compliance burdens for either the institutions or their customers.

The Dormant Bank and Building Society Accounts (Tax) Regulations 2011 (SI 2011/22) sets out the tax measures that apply to relevant dormant accounts. A relevant dormant account is defined in FA08/S39(2) as a dormant account the balance of which is to be, or has been, transferred to an authorised reclaim fund or such a fund and one or more charities.

From the time a dormant account first became a relevant dormant account to when a repayment claim to the balance of the account was settled, the Regulations switched off:

• the reporting requirements under TMA70/S17
• the deduction of tax obligation in ITA07/S851

in respect of that account and any payment of interest in respect of that account. The reporting requirements under TMA70/17 ceased with effect from 1 April 2012 and the deduction of tax obligation under ITA07/S851 does not apply to interest paid or credited after 6 April 2016.

Where a repayment claim to the balance of a dormant account is settled, all interest paid or credited to the account or included in the balance of the account during and at the end of the relevant dormant period is treated as paid at the time the repayment claim is settled. Tax will, only need to be deducted where the repayment claim is settled before 6 April 2016. ITA07/S874 will not apply to such interest.