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Interest paid by company

Interest paid by company

Where a company pays interest on a loan from an individual the interest would normally be paid net with a CT61 to cover the tax deducted. Where the individual is a non taxpayer - due to age and low income, is there a way to pay the interest gross in the same way an R85 will get bank interest paid gross or does the payment have to be paid net and then the individual reclaims the tax deducted?

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20th Dec 2012 16:51

Banks interest has tax deducted under s851 of the Income Taxes Act, and it is s852 and regulations that are made under this section which give the ability to the individuals to disapply the rules by submitting form R85.

 

Companies are required to deduct tax at the basic rate under s874, There are a number of exemptions, but non are allow a user to serve notice similar to form R85.

 

So, in short, if the Company is required to deduct tax, then the user has to reclaim this from HMRC.

 

Remember, the company need only deduct taxation if it relates to "annual payments"!

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