CTM40870 | Particular bodies: local authorities: receipt or payment of gross interest

Certain payments made or received by a local authority are outside the rules for deduction of tax. This aligned the withholding tax obligations of a local authority with those of a company.

Payments made by local authorities of yearly interest and other amounts listed at CTM35215 escaped deduction of tax if the authority reasonably believed that the recipient fell within the relevant categories.

With effect from the same date, payments within the CTM35215 categories received by local authorities could also be paid without deduction of tax if made by:

• a company,

• another local authority, or

• a partnership, if any member of the partnership is a company or a local authority,

and the reasonable belief test (see above) is satisfied in the eyes of the payer.

SAIM9035 gives details of local authorities’ remaining duty to deduct tax from interest payments.