IHTM30186 - Payment methods: payment by certificates of tax deposit

A Certificate of Tax Deposit (CTD) is a deposit made by a purchaser on account of present or future liabilities to HMRC. It takes the form of a certificate, which is issued to the purchaser who can choose whether to use it to pay an assessment (IHTM31001) or to have it encashed and the proceeds repaid. This means that the original certificate must be forwarded if it is used to pay an assessment.

The certificate shows the amount of the deposit, the date of purchase and the name of the purchaser. Each certificate has a reference number in the top left-hand corner, which must be quoted in any communication with CTD Team (the other numbers on the certificate are not used for this purpose).

The CTD scheme was closed with effect from 23 November 2017. New certificates can no longer be purchased but existing certificates can still be used until 23 November 2023.

CTD Section

The Corporate Treasury, CTD Team is responsible for applying, encashing and calculating interest on CTDs. Their contact details can be found on GOV.UK.

CTDs and deposits

CTDs, like ordinary deposits (IHTM31751), are used by taxpayers to stop interest running before an assessment is raised. A CTD purchased after the due date (IHTM30151) for tax has passed will stop interest (IHTM30341) running in the same way as a deposit. But CTDs have an additional feature - interest is payable on the CTD itself if it was purchased before the due date for tax.

Interest on CTDs

CTDs carry simple interest calculated on a daily basis from the date of deposit until

  • the due date of payment of the tax in respect of which they are tendered (i.e. the CTD is used in payment of tax)

or

  • the date on which they are surrendered for cash (i.e. the CTD is encashed). Note that the period for which interest on CTDs runs cannot exceed six years but deposits may continue to be held after the six year period.

If a CTD purchased prior to the deemed due date is surrendered in payment of the Inheritance Tax (IHT) payable on an account, CTD interest will run from the purchase date until the date of delivery of the account.

However, if a CTD is used to discharge an IHT claim on an immediately chargeable transfer (IHTM14531) or a failed potentially exempt transfer (IHTM14511) before the due date, CTD interest will run from the purchase date of the CTD until the deemed due date, i.e. the delivery of the account before the due date will not stop CTD interest running.

Who can use the CTD?

It can be used by the purchaser to pay their own liabilities, but CTDs are not transferable and cannot be applied to other taxpayers’ liabilities.

What can be paid by CTD?

IHT (and Capital Transfer Tax) can be paid by CTD, as can the other taxes, not dealt with in IHT. If the taxpayer wishes to pay interest charges (or Estate Duty) by CTD it has to be encashed by CTD Section.

There are separate instructions (IHTM31771) on how to use CTDs in assessments.