HMRC can require you to complete an Other Interest (OI) return if you’ve:
- paid interest to a reportable individual
- received interest on behalf of a reportable individual
This includes partnerships containing reportable individuals. A reportable individual is someone with a residential address in the UK.
The information on your return informs checks to make sure Self Assessment tax returns are accurate and complete.
The following legislation gives HMRC the power to issue the notice requiring you to make a return:
HMRC will charge a penalty if you fail to comply with a notice to make a return.
This guidance will help you apply the regulations so you can make an accurate return. It represents HMRC’s interpretation of the legislation and replaces all earlier versions.
Authorised Investment Funds
HMRC should serve a notice on the trustees of each Authorised Investment Fund (AIF). However, to make things simpler, notices are issued to fund managers requiring information from all AIFs under their management. The manager receiving the notice is legally responsible for making the return.
Completing a return
If you need help to complete a return, How to complete an Other Interest return gives step-by-step guidance to using either the:
Alternatively, you can arrange for a third party to complete the return on your behalf, but you remain responsible for ensuring the content is accurate and submitted on time.
Appealing against data-holder notices
Unless the notice is issued following tribunal approval, the grounds for appeal against a notice can include any of the following:
- it’s unduly onerous for you to comply with the notice or a requirement in it (this does not apply to data that tax law states you must keep)
- you’re not a relevant data-holder
- the data you’ve been asked to provide are not relevant data
In some circumstances you can make a nil return.
You must inform HMRC if you want to make a nil return. You can do this by email to firstname.lastname@example.org.
The returns cycle
This example relates to the 2021 to 2022 tax period but the process follows the same annual cycle.
|6 April 2021||UK tax year begins|
|Late February 2022||HMRC issues BBSI and OI notices requiring you to make a return|
|5 April 2022||UK tax year ends|
|30 June 2022||Deadline for submitting a return — unless otherwise stated in your notice|
Notices are issued in February of each year as part of the normal returns cycle. However, HMRC can also issue notices relating to previous tax years.
You may be required to make a return at any time up to 4 years after the end of the relevant tax year. This means it’s advisable to retain your records.
For example, HMRC can issue a notice requiring you to make a return for the 2019 to 2020 tax year (6 April 2019 to 5 April 2020) any time up until 5 April 2024.
HMRC retains your raw data for a period of 2 years so we can use your original return to resolve any data ingestion problems.
Interest you do not need to include on a return
You should not report interest:
- only collected passively, for example, where a bank clears or arranges clearance of a cheque for foreign interest, having taken no steps to secure payment of those monies
- that is not easy to identify as interest
- on Individual Savings Accounts (ISAs)
- paid to, or received on behalf of, pension scheme trustees, including any self-invested personal pension (SIPP) or small self-administered scheme (SSAS) pension that has been registered by HMRC
- paid to registered pension schemes, including individual pension accounts
- paid by you on cash deposits at branches outside the UK unless that interest is remitted to the UK, received (other than passively) and you’re acting for a reportable individual (read interest directed elsewhere for more information)
- paid on investments, other than cash deposits, held at branches outside the UK, unless paid, or received (other than passively), by you in the UK for a reportable individual
- that has accrued but has not yet been paid or credited
- on Save as You Earn or Share Save Schemes
- on National Savings and Investments certificates and Children’s Bonds
- on Child Trust Funds or Junior ISAs
- that is redemption proceeds of deeply discounted securities
- that is foreign dividends except where the distribution is taxed as interest (if you cannot immediately identify if the payment or receipt is interest, then the distribution is not reportable)
- that is repossession interest
- that is manufactured payments
Negative interest does not meet the definition of interest. In this case, it’s comparable to a fee paid to a financial institution to hold a reportable person’s money.
This means it cannot be used to offset interest paid.
For example, if a reportable person is paid £300 of interest in a year where they’ve paid £100 of ‘negative interest’ then you still need to report the full £300 in your return.
R85 gross registered and R105 cases
HMRC no longer requires R85 and R105 forms.
The How to complete an Other Interest return guidance explains how to complete these fields in your report.
Types of return
There are two types of return:
Some banks and building societies may need to complete both returns. Your notice from HMRC will identify the type of return required.
This is completed by:
- banks, building societies or other deposit takers in the UK operating in the normal course of their business, which includes in an intermediary capacity (interest distribution from bonds or certain funds) or when compensating customers for being deprived of money
- any person carrying on a trade or business who, operating in the normal course of their business, receives or retains money in such circumstances that interest becomes payable
Bank and Building Society Interest
BBSI returns are completed by banks, building societies or other deposit takers in the UK operating in the normal course of their business.
Making both types of return
There may be occasions when HMRC requires both an OI and a BBSI return. When this happens, it’s important that you:
- use the correct return for reporting the interest type
- only report the interest relating to a customer once, and do not duplicate it on both the BBSI and OI return
When Other Interest can be reported on a BBSI return
You can report OI information on the BBSI return (using the BBSI format and guidance) rather than on the OI return in the following circumstances:
- building societies that pay interest on permanent interest-bearing shares
- local authorities reporting interest paid or credited to individuals
- National Savings and Investments reporting interest paid on some of their products
However, if you are not required to make a BBSI return, these must be reported on your OI return.
Making an Other Interest return
If you receive an OI notice, you must make a return regardless of the nature of your business. This includes UK branches of non-resident businesses.
In these cases, only the interest paid or received by the UK branch should be put on the return. Do not include interest paid or received by parts of the business that are not resident in the UK. This may mean that more than one person could report one interest payment. For example, if a broker and their ‘clearer’ both receive notices.
If you receive a notice and know that someone else will be reporting the same information, notify HMRC’s data acquisition team by emailing DA.Enquiries@hmrc.gov.uk.
You do not need to make enquiries to find out whether anyone may be reporting the same interest as you.
If the payee or recipient is not an individual, or not reportable, do not include their interest in your return. For example, if you pay interest to a nominee company that is acting for an individual, do not include it in your return. Similarly, do not report payments by AIFs to a reputable intermediary.
You should be able to decide from the information you hold whether a person is a reportable individual. HMRC does not expect you to, either:
- make further enquiries to establish this
- have prior knowledge of whether a customer is liable to pay tax before including them on your return
If your records name the account holder, or recipient of the interest, as an ‘entity’ rather than an individual you do not have to report their interest.
|Account holder details||Reporting status|
|G&G Investment Club||no report is required, as this does not appear to be an individual|
|Green and Griffin||a report is required, as this appears to be 2 individuals|
|Green (Treasurer)||a report is required, as this appears to be an individual|
Interest you should include on your return
- interest on all investments paid or received in the UK, other than passively, to or for any reportable individual
- foreign interest (interest received from a non-UK source)
- quoted Eurobond interest (a quoted Eurobond is issued by a company, carries a right to interest and is listed on a recognised Stock Exchange)
- interest on building society permanent interest bearing shares (PIBS)
- UK Gilt interest (but not accrued interest that is reflected in the sale or purchase price)
- interest distributions by UK authorised investment funds (even if they are not paid as interest but are used to acquire more units or increase the value of existing units)
- interest paid on bearer instruments
Invalid Individual Savings Accounts
You should report interest paid or credited to an:
- invalid ISA
- ISA that has been repaired, up to the date of repair
If the ISA is repaired or found to be invalid before you send HMRC the return, show the correct position on the return.
If you have already sent in the return when either of these happen, do not send a further return but retain the details in case HMRC requests them.
Registered pensions schemes
Before 6 April 2006, HMRC would approve pension schemes that met certain criteria and issue them with an approval letter. If the letter was passed to their interest payer, the payer did not have to report the pension scheme’s interest on their BBSI return.
This changed from 6 April 2006. Pension schemes are now ‘registered with HMRC’ not ‘approved by HMRC’. Almost all schemes previously approved by HMRC were transferred directly to the register on 6 April 2006.
Any pension scheme opening an account after this date must download its registration details and give these to the interest payer as evidence of registration.
Interest payers can rely upon previously lodged ‘approval’ letters as proof of registration for existing accounts or schemes, unless they have evidence that the scheme is no longer registered.
Interest amount below the personal savings allowance
If the interest earned or credited for an investor is below the personal savings allowance, you should still make the return.
This is because the investor may have more than one account and will need to pay tax on the total earned across all accounts.
Interest directed elsewhere
Interest is treated as received by ‘person A’ if:
- it’s received by ‘person B’ as a nominee for A
- ‘person A’ has directed or consented to this
For example, if interest on investments is held by a nominee and mandated directly to an individual investor’s bank account, the nominee must report that interest.
If interest is paid to, or received on behalf of, an identifiable reportable individual via a pooled account, the interest is reportable on your OI return.
If the interest cannot be tied to a particular individual on a pooled account, it is not reportable on receipt.
The interest is only reportable once it has been paid to a reportable individual. HMRC then requires the pool account operator to make an OI return.
Partnerships and other joint holdings
You must report interest paid to any partnership or joint holding where any of the partners or joint holders is a reportable individual. Different reporting scenarios may occur depending on the information you hold relating to the partnership or joint holding.
If you do not hold details of the reportable individuals themselves you should report the partnership name and address.
Where only one or two of the partners or joint holders are reportable individuals, report the:
- ‘client name’ as being the name of the account or holding title
- names of the reportable partners as ‘participants’
- total number of partners or joint holders, including those who are not reportable individuals, as the ‘number of participants’
If there are more than two reportable individuals in the partnership or joint holding, you may limit your report to just the:
- ‘client name’ as being the name of the account or holding title
- first two named reportable individuals to the account or holding as ‘participants’
- total number of partners or joint holders, including those who are not reportable individuals, as the ‘number of participants’
If two or more of the partners or joint holders are reportable individuals with the same address, you can combine their entries in one report.
Trusts and reporting by trustees
You should report any interest paid to an agent for the trustees if the agent is a reportable individual or a partnership.
There may be a change of beneficiary or trust type during the course of the year, for example, where a life tenant dies. In other cases, the right to the interest may pass to a new beneficiary under the terms of the trust.
In all these types of cases, you should report on the basis of who was the beneficiary at the time interest was paid. This may mean you have to make two or more reports for the year, one for each beneficiary or type of trust.
Interest to trustees of discretionary or accumulation and maintenance trusts
Report the name of the trustees where they are reportable. If there is more than one trustee, apply the partnership rule.
Interest to trustees of Bare, Interest in Possession or Life Interest Trusts
Report the name of the beneficiary if they are a reportable individual. If you do not know the name of the beneficiary, you should report the name of the trustee if they are a reportable individual.
For clarity, these types of trust are defined as follows:
- a Bare trust is a trust where the beneficiary has absolute entitlement to the investments of the trust and any income arising from them
- an Interest in Possession trust is where the beneficiary has the immediate entitlement to any income
- a Life Interest trust is where the beneficiary (known as a ‘life tenant’) is entitled to the trust income for a period of time, usually until death but it can be for some other period
Distributions by trustees to beneficiaries of trusts
There is no requirement for trustees of Discretionary or Accumulation and Maintenance Trusts to report interest they have received on their OI return. They are deemed to have received it on behalf of the trust and the beneficiaries do not have an automatic entitlement to it.
Distributions made by these trustees to their beneficiaries are not ‘interest’ and so are not reportable, even
if one or more of the beneficiaries has become entitled to their share of the trust income under the terms of the trust and is a reportable individual.
Trustees of Bare, Interest in Possession or Life Interest Trusts may receive a notice to make an OI return where their beneficiary is a reportable individual. This is because the beneficiary is entitled to the income of the trust in the form in which it arises.
You must report interest paid to, or received on behalf of, deceased reportable individuals up to their date of death, in their name and at their last known address.
Interest paid to, or received on behalf of, executors is reportable if one or more of the executors is a reportable individual. This applies to the whole period of their executorship. Apply the rules for reporting partnerships where there is more than one executor.
Executors only need to:
- make an OI return if they receive a notice to do so
- report assets giving rise to the payment or receipt of interest that have been assigned to a reportable individual beneficiary
- report interest paid or received from the date the assets were assigned
If you receive a notice and know that someone else will be reporting the same information, inform HMRC at DA.Enquiries@hmrc.gov.uk.
You must include payments on Sharia compatible accounts and other types of alternative financial arrangements in your return as if these amounts were interest.
Definitions of ‘alternative financial returns’, including accounts compatible with Sharia law are covered in paragraph 12 of schedule 23.
Bankruptcy and insolvency
The interest should be reported if the payee is a ‘reportable person’.
Reportable addresses are addresses that are in the UK.
Generally, it’s the address on 5 April of the returning year. If your system is set up to report based on information available on the date interest is paid or credited, HMRC will accept your report of that information.
If asked, you must be able to show HMRC:
- why you have included, or excluded any payment or credit of interest from your return
- that the addresses reported (or not) are the addresses of the persons interest has been paid or credited to
Customers with more than one address
You should return the individual’s residential address. Only return a correspondence address if you do not hold the residential address. This may mean that you do not report some interest.
For example, your ‘Know your customer’ information shows your investor has a UK correspondence address, but a Russian residential address. You would not include interest relating to this investor on your return because their residential address is outside the UK.
‘Gone away’ and dormant accounts
Report the last known address if the interest has already been paid or credited.
Do not report interest you cannot pay because the payee’s whereabouts are unknown.
Once the payee’s whereabouts are known, report the total interest for the year, in the year you pay it, with the new address.
If your IT-systems report by ‘the date when the interest is payable’ HMRC will allow you to report as if the interest had been paid.
Include any interest paid or credited to the account if the investor had a UK address on the date the account was closed. If you hold a later address on your system, it can be used as the basis for reporting (or non-reporting if the later address is not in the UK).
British Forces Post Office or ‘care of’ addresses
A British Forces Post Office or ‘care of’ residential address may not be enough to establish if an investor is a reportable person. This may necessitate (within your remit) further enquiries with the investor to clarify the position. If you do not receive a reply, you should continue to report the interest.
Submitting your return
The notice that HMRC sends you will specify the methods and deadline by which you need to submit your return.
You can find more detailed information about formatting and submitting your return in the How to complete an Other Interest return guidance.
HMRC can charge penalties under schedule 23 of the Finance Act 2011 (paragraphs 30, 31 and 32). The following penalties apply if HMRC sends you a notice to make a return and you do not comply:
- £300 for failure to comply in the first instance
- up to £60 for each additional day that the return is not made after the date the £300 penalty is imposed
If you still do not comply, the law allows HMRC to apply to the First-tier Tribunal for a penalty of up to £1,000 per day.
There is also a penalty of up to £3,000 for an incorrect return, so you should take reasonable care when making your return and do not make a deliberately incorrect return.
Inform HMRC immediately if you submit a return and then discover an error. This may help minimise any potential penalty.