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Amendment of Part 8 of Principal Act (annual payments, charges and interest)
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23. (1) Part 8 of the Principal Act is amended—
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(a) in section 256(1) by substituting the following for the definition of “appropriate tax”:
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“ ‘appropriate tax’, in relation to a payment of relevant interest, means a sum representing income tax on the amount of the payment at the rate of 41 per cent;”,
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(b) in section 261(c)(i)—
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(i) by substituting the following for clause (II):
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“(II) where the taxable income of that person includes relevant interest, the part of taxable income equal to that relevant interest shall be chargeable to tax at the rate at which tax was deducted from that relevant interest,”,
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and
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(ii) by deleting clause (III),
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(c) in section 261A—
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(i) in subsection (1) by inserting “that is opened before 16 October 2013” after “account”, and
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(ii) by inserting the following subsection after subsection (8):
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“(9) An account shall cease to be a special term account on a date which is—
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(a) 3 years after the day on which the account was opened if the account is a medium term account, or
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(b) 5 years after the day on which the account was opened if the account is a long term account, including an account which was opened as a medium term account but which was subsequently converted into a long term account.”,
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(d) in section 267A(1)—
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(i) in the definition of “long term share account” by substituting “account that is opened before 16 October 2013” for “account opened”,
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(ii) in the definition of “medium term share account” by substituting “account that is opened before 16 October 2013” for “account opened”, and
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(iii) by inserting the following definition:
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“ ‘regular share account’ means an account, other than a special share account or a special term share account, opened by a member (being an individual) with a credit union;”,
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(e) by inserting the following section after section 267A:
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“Taxation of dividends on regular share accounts
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267AA. A credit union shall treat—
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(a) the value of shares held in a regular share account at any time, as an amount of a relevant deposit held by it at that time, and
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(b) the value of any dividend paid on those shares at any time, as an amount of relevant interest paid at that time in respect of such relevant deposit and the provisions of Chapter 4 of this Part shall apply to such relevant interest treated as paid by the credit union as they apply to relevant interest paid by a relevant deposit taker.”,
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(f) in section 267B—
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(i) in subsection (2)(b) by deleting “, and the appropriate tax in respect of such relevant interest shall be at a rate of 33 per cent”, and
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(ii) in subsection (3)(b) by deleting “, and the appropriate tax in respect of such relevant interest shall be at a rate of 33 per cent”,
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(g) in section 267C by inserting the following subsection after subsection (5):
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“(6) An account shall cease to be a special term share account on a date which is—
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(a) 3 years after the day on which the account was opened if the account is a medium term share account, or
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(b) 5 years after the day on which the account was opened if the account is a long term share account, including an account which was opened as a medium term share account but which was subsequently converted into a long term share account.”,
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and
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(h) in section 267M by deleting “paragraph (b) of” where it occurs in subparagraphs (i) and (ii) of subsection (2)(a).
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(2) Subsection (1) applies to interest or dividends (within the meaning of Part 8 of the Principal Act) paid on or after 1 January 2014.
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