Revenue Note for Guidance

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Revenue Note for Guidance

260 Provisions supplemental to sections 258 and 259

Summary

This section ensures that where financial institutions do not actually pay (or credit) interest on a deposit in a year of assessment (for example, long term savings products where interest is paid at the end of a fixed period) they will account on an annual basis for DIRT on the accrued interest on the deposit.

The section does not alter in any way the liability to tax of the depositor who will continue to be chargeable to DIRT in respect of the interest for the year in which it is actually paid (or credited).

Details

Definitions

(1) “specified deposit” is any relevant deposit made after 28 March, 1996 in respect of which specified interest is payable other than such deposits —

  • held in a Special Savings Account, or
  • in respect of which —
    • interest is determined by reference to changes in a Stock Exchange or other financial index,
    • the financial institution had been making arrangements before 28 March, 1996 to accept the deposit, and
    • the deposit is made on or before 7 June, 1996.

“specified interest” is interest in respect of a specified deposit other than any part of that interest which —

  • is payable annually or at more frequent intervals, or
  • cannot be determined until the date it is actually paid; this applies even where the terms under which the deposit was made are complied with fully (for instance, the allowance for the possibility of early withdrawal would not make the interest payable indeterminate).

Specified interest accruing in a year treated as paid in the year

(2) The amount of specified interest accruing in any year of assessment is treated as paid in that year, except in the year in which the specified interest is actually paid. This deeming provision is necessary for the purposes of section 258 which regulates the time and manner in which DIRT in relation to a payment of relevant interest is to be accounted for and paid. As a result of this procedure the financial institution is to account for DIRT in accordance with section 258 for the year of assessment for which the specified interest is deemed to have been paid.

(3) DIRT is to be deducted from the full payment of specified interest when that payment is actually made. However, DIRT paid in respect of accruals of that interest in previous years of assessment (which interest would have been deemed to have been paid under this section) may be credited against the financial institution’s liability for DIRT for the year of actual payment (or of subsequent years if necessary). This is for clarification only since the obligation to deduct, account for and pay DIRT on the interest when it is actually paid already arises under sections 257 and 258.

Derogation

(4) A derogation from the section is provided where for a year of assessment and all preceding years of assessment:

(a) in accordance with section 258(4) or 259(4), as may be appropriate, a deposit taker makes a payment on account of appropriate tax in respect of specified interest as if, in relation to each specified deposit held by it, the references:

  • (i) in section 258(4) to each of the periods referred to in subparagraphs (i), (ii) and (iii) of paragraph (b) of section 258(4) in the year of assessment were a reference to the period beginning on the date on which the specified deposit was made and ending on each date referred to in subparagraphs (i), (ii) and (iii) of paragraph (b) of section 258(4)(a), as the case may be, in the year of assessment,
  • (ii) in section 259(4)(i), where it occurs in the meaning assigned to “A”, to the period of 12 months ending on each of the dates referred to in subparagraphs (i), (ii) and (iii) of section 258(4)(a) in the relevant year, were a reference to the period beginning on the date on which the specified deposit was made and ending on each date referred to in subparagraphs (i), (ii) and (ii) of section 258(4)(a), as the case may be, in the year of assessment, to “the period of 12 months ending on the 5th day of October in the relevant year”,
  • in section 259(4)(ii), where it occurs in the meaning assigned to “A”, to the period of 12 months ending on 30 September in the relevant year, were a reference to the period beginning on the date on which the specified deposit was made and ending on 30 September in the year of assessment.

(b) A further condition which must be complied with if the derogation is to apply is that the amount to be paid on account of appropriate tax for that year including any amounts payable in accordance with sections 258(4) and 259(4) as so modified, before any set-off of any amount on account of appropriate tax paid in an earlier year of assessment, does not exceed the DIRT payable by the financial institution for the year of assessment.

Relevant Date: Finance Act 2019