CHAPTER 3

Deposit return

Overview

This Chapter sets out the tax treatment of “deposit returns”.

267Q Treatment of deposit return

Summary

This Chapter sets out the tax treatment of “deposit returns”.

Details

The treatment of “deposit return” is made subject to section 130 so as to ensure that any “deposit return” which is similar to a distribution will not be treated as interest.

(a) A “deposit return” will be treated for all tax purposes as if it were “relevant interest” paid on a deposit of money and the provisions of Chapter 4 of Part 8 (deposit interest retention tax) will apply to the return.

(b) The relevant deposit taker will not be regarded as carrying on a trade in partnership with the depositor merely by virtue of the arrangement. This is necessary because Islamic equivalents of deposit transactions have some of the characteristics of a partnership.

Relevant Date: Finance Act 2019