812 Taxation of income deemed to arise from transfers of right to receive interest from securities

Summary

Where a person who owns securities sells or transfers the right to receive interest or dividends on the securities while retaining ownership of the securities, that person is to be charged to tax in respect of that income.

Details

Definitions

(1) “interest” includes dividends and annuities, while “securities” includes stocks and shares of all kinds.

The charge to tax

(2) Where an owner of securities sells or transfers the right to receive interest on them but does not sell or transfer the securities themselves, the following rules apply —

• the interest is deemed to be income of the owner or, as appropriate, the beneficial owner;
• where the proceeds of the sale of public revenue dividends or foreign dividends have not had tax deducted at source, the owner or beneficial owner is chargeable to tax on the interest under Case IV of Schedule D with credit given for any tax shown to have been borne by that interest;
• the owner may, instead of being charged under Case IV of Schedule D, be charged under Case III of that Schedule on the basis of amounts remitted to the State if the interest would have been taxed on the remittance basis;
• the provisions of the Tax Acts relating to deduction of tax from interest are not affected by this subsection.

(3) As regards corporation tax —

• the provisions of subsection (2)(c) apply but without the credit for tax borne, and
• the remittance basis (subsection (2)(d)) does not apply.

Information

(4) The Revenue Commissioners may, by written notice to any person, ask for particulars of securities owned by that person to establish whether tax had been paid on the interest arising from those securities or whether the sale proceeds had been charged to tax under Schedule C or Schedule D.

Occasions when this section does not apply

(5) This section does not apply to deem the owner or beneficiary of the interest chargeable to tax on that interest if:

• (a) the interest would not have been chargeable to tax in the State had it been received by the owner or beneficiary at any point between the sale or transfer of the right to receive the interest and the actual payment of the interest.
• (b) the owner or beneficiary is carrying on a trade or profession, or a business the profits of which are computed using the Case I rules (e.g. a ‘section 110 company’, a Case III trade etc.) and the profits from the sale of the right to receive the interest is taken into account in computing the profits of that trade / profession / business.

Relevant Date: Finance Act 2021