A government proposal to deduct income tax at source from interest on compensation payments to individuals should be introduced gradually in order to reduce disruption to businesses.
This was one of the responses to a government consultation earlier this year on possible changes to the income tax rules on interest. Another recommendation was for clearer guidance on the taxation of interest payments when the changes are made in the 2013 Finance Bill.
The proposals will not affect the deductibility of interest paid and received in the course of a trade or property business. The ICAEW said that “generous” interest provisions in the UK tax code make the tax system competitive and encourage investment in the UK.
The proposed changes include:
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- Interest included in compensation payments
- Yearly interest arising in the UK
- Quoted Eurobonds