HM Revenue and Customs Brief 34/13
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Issued 11 November 2013
Reporting of interest payments
Who needs to read this?
Financial institutions that make returns to HM Revenue
& Customs (HMRC) about payments of interest. These returns may
be made under schedule 23 (formerly sections 17/18 TMA) or under the UK
regulations implementing the European Union Savings Directive (EUSD).
What action should be taken
Check that your procedures are correctly separating interest
payments you make to those with addresses in the UK and fully
reportable countries from those with addresses in the EU and other
In general you should be reporting those with:
a. UK and fully reportable country addresses using the
schedule 23 template and rules
b. addresses in EU Member States and other prescribed
territories using the EUSD template and rules
Following discussions with other European Union Member States,
HMRC has made an initial check of the data we have supplied to other
states under the EUSD. Preliminary analysis shows that in some cases
financial institutions may be using inappropriate criteria to decide
which format they report payments in. For example, by determining the
'country of residence' as the issuing country of the passport of the
customer rather than the country in which their current permanent
address is situated. This has lead to interest paid to a person with a
UK address being reported to the fiscal authorities of other EU Member
States instead of to the UK.
Financial institutions who pay interest to their clients must
report those payments to HMRC in accordance with two sets of rules.
- Payments of interest to clients who live in the UK or fully
reportable countries (see list 1 below) are reported under rules made
under schedule 23 to Finance Act 2011. These are currently called type
17 and type 18 returns because they used to be made under sections 17
and 18 of the Taxes Management Act 1970.
- Payments of interest to clients with addresses in the EU
and other prescribed territories (see list 2 below) are reported under
rules of the EUSD (2003/48/EC) (The Reporting of Savings Income
Information Regulations (SI2003/3297)).
Please note that the information required under these two
reporting systems is different in some ways. However, we have produced
a combined template that can be completed with information from either
system and then supplied to us in an electronic format.
When we receive the combined reports our computer systems
separate out those marked EUSD from those marked type 17 or type 18.
The returns coded EUSD are grouped by territory and then transmitted
electronically to that other territory. This means, for example, that
we gather together and send to France all the reports we get from
financial institutions that they have made payments of interest to
people who live in France. This may include a few people who have an
address that is not in France but which the EUSD rules say are to be
treated as living in France, such as some staff of the French embassy.
Our initial analysis shows that some financial institutions
may not be coding their returns completely correctly.
There is the possibility that interest paid to a person with,
say, a UK address should be reported to the fiscal authorities of
another EU Member State but we would expect the number of such
instances to be very small.
Where a person has a UK address their information should
normally be reported within the type 17 and 18 system. If such people
are reported using the EUSD system, HMRC may miss out on the tax
information we need and the other Member State receive information that
they do not need.
We will continue our research and address particular concerns
to individual financial institutions. However, all financial
institutions should check that their procedures result in them making
Schedule 23 and the EUSD regulations make provision for
penalties to be charged where a financial institution provides
incorrect information deliberately or due to a lack of care. An
institution that takes reasonable care but still produces an inaccurate
return will not be liable to a penalty. An institution that takes no
action after the reminder from this brief may find it difficult to
avoid a penalty by showing that it took reasonable care when providing
List 1: Fully Reportable countries 2013-14
Interest paid to people in these territories is reported to
HMRC along with that for people in the UK using the Type 17 or 18
Australia, Bermuda, Canada, Japan, New Zealand, Norway, South
List 2: Prescribed Territories 2013-14
Interest paid to individuals in these territories is reported
to HMRC using the EUSD format:
Austria, Belgium, Bulgaria, Croatia, Czech Republic, Denmark,
Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy,
Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal,
Republic of Cyprus, Romania, Slovakia, Slovenia, Spain, Sweden, Aruba,
Bonaire, St Eustatius and Saba, British Virgin Islands, Curaçao,
Gibraltar, Guernsey, Isle of Man, Jersey, Montserrat, Sint Maarten.
Further information on this subject can be obtained from the
internet by following the link below.
17 and 18 reports of interest and EUSD
Or by phone from Nick Wright on 0161 475 8577.
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Article Published/Sorted/Amended on Scopulus 2013-11-15 08:31:11 in Tax Articles