Inland Revenue Outlines Remit Of EU Savings Tax Rules

by Robert Lee, Tax-News.com, London

21 April 2003

The UK government's Finance Bill, which gives effect to this year's budget proposals, also includes a section that will allow the regulations of the European Savings and Tax Directive to be incorporated into British law.

The bill will allow the Inland Revenue to automatically collect and exchange with other EU member governments information on the payment of income from investments made by residents of the EU and a number of other participating states including Switzerland and the US. The rules will come into effect if the Savings Directive is finally adopted by the EU: currently it is bogged down as a result of last-minute objections from Italy. The Directive will not take effect before 1 January 2005; the precise date is also dependent on agreements between the EU and its dependent territories.

The Inland Revenue has outlined the remit of the directive on its website. It will require any public body or business that pays or collects savings income on behalf of overseas residents to report details on individuals, and payments made, to the Inland Revenue.

This will include:

• building societies, banks and other deposit-takers;
• registrars, custodians and nominees;
• authorised unit trusts and open-ended investment companies; and
• any other person who makes savings income payments in the course of their business (for example, lawyers and stockbrokers).

Reports will be made annually. The details that have to be reported about individuals will include information on their identity and residence. Different rules will apply depending on whether individuals became a customer of the paying agent before or after 1 January 2004.

Tax authorities are required to provide information to other tax authorities within six months of the end of their fiscal year. If the Directive takes effect from 1 January 2005, then the first reports, covering the period from 1 January to 5 April 2005, will be required by 30 June 2005. This will enable the Inland Revenue to process and collate the reports, and provide information to overseas tax authorities by 5 October 2005.

Consultation will be launched when the agreed text of the Directive is published, and the description of the scheme set out above is based on the current draft. The consultation will focus on building on the current reporting arrangements in sections 17 and 18 Taxes Management Act 1970 and the Income Tax (Interest Payments) (Information Powers) Regulations 1992 (SI 1992/15) in order to minimise burdens on those payers who already have to provide information. These existing arrangements already require UK businesses and public bodies to provide information to the Inland Revenue about interest payments they make.

The Inland Revenue intends to use a dedicated site on the main Inland Revenue website for the purpose of the consultation. This will include technical papers on detailed aspects of the rules, the text of the Directive, a commentary on the Directive, and a glossary. Further papers will be added over time. The site will also include answers to a list of frequently asked questions.

The detailed rules for the scheme will be contained in regulations. There will be consultation on the rules, and on the regulations, once the text of the Directive has been published.

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