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HM Revenue and Customs Brief 26/08

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HM Revenue and Customs -Tax Authorities

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Issued 16 May 2008

Paying tax deducted from interest that is paid by funding bond

It seems that there is some confusion about how a company that has paid interest by funding bond should account to HM Revenue & Customs (HMRC) for any tax deducted. Revised guidance on funding bonds will be issued at a later date but in the meantime the following page from the new guidance explains how to pay the tax deducted from interest that has been paid by funding bond.

CFM17040 – Funding bonds: paying the funding bonds to HMRC

Once a company has retained part of a funding bond issue for the tax deducted from the interest paid by the funding bond issue it then has to pay the tax deducted over to HMRC.

The company should pay the tax deducted using its CT61 return for the quarter that the interest was paid. The CT61 should be completed using the value of the funding bond at the date of issue as the amount of interest paid by funding bond. This may not be the same as the face value of the funding bond.

The company may decide to pay the tax deducted with a monetary payment in which case the CT61 can be sent to the Accounts Office as usual, but see below about the information to be included in a covering letter. However, if the company decides to pay the tax deducted to HMRC using the funding bonds it has retained, then it should ensure that the funding bonds used to pay the tax deducted are issued to HMRC’s nominee company RN Ltd (company registration number 279190). The registered office of RN Ltd is Room 1E/03, 1st Floor, 100 Parliament Street, London SW1A 2BQ.

Whether or not the tax deducted from the funding bond is paid using a monetary payment or by submitting the funding bonds retained the CT61 should be sent to the Accounts Office with a covering letter providing the following:

  • the amount of interest paid by funding bond (which should be the value at issue) and included on the CT61
  • if different the face value of the funding bond at issue – this will enable HMRC to consider the valuation of the funding bonds
  • an explanation of the method and the factors taken into account when valuing the funding bond at issue
  • the amount of tax deducted from the interest paid by funding bond
  • a copy of the terms and conditions of the funding bonds
  • if the tax deducted is being paid by funding bonds the relevant funding bonds issued to RN Ltd

The Accounts Office will ensure that the funding bonds (if provided) and the covering letter are sent to the appropriate person within HMRC to co-ordinate any necessary valuation of the funding bond issue.


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Article Published/Sorted/Amended on Scopulus 2008-05-16 21:03:51 in Tax Articles

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