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898E Interest payment.

(1) Subject to section 898K, in this Chapter “interest payment” means—

(a) any payment of interest of money, whether yearly or otherwise, including any bonus or interest payable under an instalment savings scheme (within the meaning of section 53 of the Finance Act 1970) and any accumulated interest payable in respect of any savings certificate referred to in section 42;

(b) any dividend or other distribution made in respect of shares in a building society;

(c) any dividend or other distribution made in respect of shares in a credit union;

(d) the excess of any amount received in respect of the redemption of a security, a unit of a security or a strip of a security over the amount paid for the security, unit or strip on issue;

(e) any prize attaching to a security, including a prize in respect of a prize bond issued under section 22 of the Finance (Miscellaneous Provisions) Act 1956;

(f) any amount realised on the sale, refund or redemption of a security, unit of a security, or a strip of a security, which is referable to accrued or capitalised interest, whether or not any such accrued or capitalised interest is separately identified;

(g) subject to subsections (2), (5) and (6), income distributed by—

(i) a UCITS authorised in accordance with the UCITS Directive or an equivalent undertaking for collective investment established in a relevant territory other than a Member State,

(ii) a deemed UCITS, or

(iii) an undertaking for collective investment established in a territory other than a relevant territory,

which income derives from an interest payment within the meaning of any of the preceding paragraphs of this subsection and which income is received by any of these undertakings either directly or indirectly from a residual entity;

(h) subject to subsections (2) to (6), income realised on the sale, refund or redemption of shares or units in—

(i) a UCITS authorised in accordance with the UCITS Directive or an equivalent undertaking for collective investment established in a relevant territory other than a Member State,

(ii) a deemed UCITS, or

(iii) an undertaking for collective investment established in a territory other than a relevant territory.

(2) Where a paying agent has no information with which to establish the proportion of any income referred to in paragraphs (g) and (h) of subsection (1) which is income derived from an interest payment that paragraphs (a) to (f) of that subsection relates, then the paying agent is to treat the full amount of any such income as an “interest payment” within the meaning of this section.

(3) (a) Income referred to in paragraph (h) of subsection (1) is only to be regarded as an interest payment where the UCITS or equivalent undertaking for collective investment established in a relevant territory other than a Member State, deemed UCITS or undertaking concerned has invested directly, or by way of the acquisition of shares or units in another such UCITS or equivalent undertaking, deemed UCITS or undertaking, more than 40 per cent of its assets in investments which produce or have the potential to produce interest or other income such as is referred to in paragraphs (a) to (f) of subsection (1); but where a paying agent has no information with which to establish the percentage of such assets so invested, then for the purposes of this Chapter more than 40 per cent of such assets are to be treated as so invested.

(b) As on and from 1 January 2011, paragraph (a) shall apply with the substitution of “25 per cent” for “40 per cent” in both places in which it occurs.

(4) Where a paying agent is unable to determine the amount of income realised by a beneficial owner from the sale, refund or redemption of any shares or units referred to in paragraph (h) of subsection (1), then the full proceeds from the sale, refund or redemption of the shares or units shall be treated as the amount of income realised by the beneficial owner for the purposes of that paragraph.

(5) Income referred to in paragraphs (g) and (h) of subsection (1) shall not be regarded as an interest payment in the case of such income from a UCITS (being an undertaking for collective investment in transferable securities within the meaning of the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 1989 (S.I. No. 78 of 1989)) or a deemed UCITS (being a person resident in the State) where the UCITS or deemed UCITS investment in assets referred to in paragraphs (a) to (e) of subsection (1) do not exceed 15 per cent of its total assets.

(6) (a) Income referred to in paragraphs (g) and (h) of subsection (1) shall not be regarded as an interest payment in the case of income from a UCITS authorised in accordance with the UCITS Directive or a deemed UCITS established in a Member State other than the State where the Member State concerned has exercised the option in paragraph 6 of Article 6 of the Directive to derogate from subparagraphs (c) and (d) of paragraph 1 of that Article.

(b) Income referred to in paragraphs (g) and (h) of subsection (1) shall not be regarded as an interest payment in the case of income from an undertaking for collective investment which is equivalent to a UCITS or from a deemed UCITS established in a relevant territory not being a Member State where the relevant territory concerned has exercised, under arrangements, an option equivalent to the option in paragraph 6 of Article 6 of the Directive to derogate from a provision equivalent to subparagraphs (c) and (d) of paragraph 1 of that Article.

(7) (a) An interest payment to a residual entity which has not elected to be treated as a UCITS in accordance with section 898D(3) shall, at the time the interest payment is received by the residual entity, be treated for the purposes of this Chapter as an interest payment (in this Chapter referred to as a “deemed interest payment”) made by the residual entity at that time.

(b) This subsection shall not apply to—

(i) a residual entity resident in the State where the residual entity’s investment in assets referred to in subsection (1) does not exceed 15 per cent of the total investments of the residual entity, and

(ii) (I) a residual entity established in a Member State other than the State where the Member State concerned has exercised the option in paragraph 6 of Article 6 of the Directive to derogate from paragraph 4 of that Article, or

(II) a residual entity established in a relevant territory not being a Member State where the relevant territory concerned has exercised, under arrangements, an option equivalent to the option in paragraph 6 of Article 6 of the Directive to derogate from a provision equivalent to paragraph 4 of that Article.

(8) For the purposes of this Chapter—

(a) the percentages referred to in subsections (3), (5) and (7)(b)(i) shall be determined by reference to the most recent investment policy of the person or undertaking concerned as laid down in the instrument of incorporation of the person or the rules of the undertaking,

(b) in the absence of the information referred to in paragraph (a) or where a paying agent is in possession of information to suggest that the investment policy is not being implemented, the percentages shall be determined by the actual composition of the assets of the undertaking or the person.

(9) For the purposes of this Chapter any amount credited as interest shall be treated as a payment of interest, and references in this Chapter to interest being paid shall be construed accordingly.

(10) For the purposes of this Chapter any reference in this Chapter to the amount of an interest payment in a case where the interest payment is subject to deduction of tax shall be construed as a reference to the amount which would be the amount of that payment if no tax were to be deducted from that payment.

(11) For the purposes of this Chapter penalty charges for the late payment of any interest or other payment referred to in paragraphs (a) to (f) of subsection (1) shall not be regarded as an “interest payment” within the meaning of that subsection.

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