Bank and Building Society Interest returns
Find out about making a Bank and Building Society Interest (BBSI) return and the types of interest you should report.
Background
HMRC requires UK banks and building societies to annually submit information about interest paid or credited to reportable persons.
This information is used to pre-populate customer tax accounts, it informs:
- the issue of PAYE notices of coding and tax calculations
- 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:
- schedule 23 of the Finance Act 2011
- the Data-gathering Powers (Relevant Data) Regulations 2012 (regulations 5 to 10 inclusive cover the data HMRC can request)
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.
Completing a return
If you need help to complete a return, How to complete a Bank or Building Society Interest return gives step-by-step guidance to using either the:
- HMRC spreadsheet
- electronic flat text file
Alternatively, you can arrange for a third party to complete the return on your behalf, but you are still 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
Nil returns
In some circumstances you can make a nil return. For example, if a product is withdrawn or a new product is introduced and no interest has been paid at the time the return is due.
You must inform HMRC if you want to make a nil return. You can do this by email to tpi.a@hmrc.gov.uk or by writing to:
HM Revenue and Customs — Data Acquisition and Exchange
Cardiff Regional Centre
Ty William Morgan
6 to 7 Central Square
Cardiff
CF10 1EP
United Kingdom
The returns cycle
This example relates to the 2021 to 2022 tax period but the process follows the same annual cycle.
| Date | Event |
|---|---|
| 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 |
Record retention
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 payable:
- to persons resident outside the UK
- to central monetary institutions and international organisations designated by order under section 774 of the Income Tax (Trading and Other Income) Act 2005 (see Appendix A)
- on certificates of deposit (including transferable paper)
- on Individual Savings Accounts (ISAs) unless the ISA is invalid or repaired
- on investments held at a branch situated outside the UK
- on Save As You Earn or Share Save Schemes
- to approved or registered pension schemes, you do not need to report interest paid to the trustees of a pension scheme, including a self-invested personal pension or small self-administered scheme approved or registered by HMRC
- to the trustees of a non-resident pension scheme for interest on the scheme
- in respect of syndicated loan interest
- on Child Trust Funds or Junior ISAs
- to persons holding funds on behalf of a person with a physical or mental health condition or disability as a result of a court order (such as criminal injuries compensation or personal injury awards)
- on inter-bank deposits
Negative interest
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 a Bank or Building Society Interest return guidance explains how to complete these fields in your return.
Types of return
There are two types of return:
- Bank and Building Society Interest (BBSI)
- Other Interest (OI)
Making both types of return
There may be occasions when HMRC requires both a BBSI and an OI 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 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 a BBSI return
You must report on all accounts that have interest paid or credited for any of your investors who are reportable persons with UK addresses. This includes individuals, and non-individuals such as partnerships, associations, companies, clubs, executors and trustees.
Do not report accounts of persons with an address outside the UK. This includes companies not resident in the UK.
Usually, the information needed to decide if an investor is a reportable person is in your ‘Know your customer’ check. 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
However we do require you to accurately categorise reportable persons to make sure tax is charged correctly.
Categorisation
When you make your return, you must correctly categorise the person to whom interest is paid or credited by participant type. The term ‘person’ can refer to one of two participant types:
- individuals
- non-individuals
The legal owner of an account is the ‘beneficial owner’ of the funds in that account. Normally they are classed as an ‘individual’ and are:
- entitled to the interest
- liable for any tax on that interest
However, in some cases the account owner is not the beneficial owner and should be classed a ‘non-individual’. This will make sure they do not receive an incorrect tax charge.
Representatives
If interest is paid to an individual account owner acting as a representative, you should categorise them as a ‘non-individual’. They are not the beneficial owner of the account and they should not pay tax on the interest.
The name given to an account may help you identify if the owner is acting in a representative capacity. There’s more information about categorising account holders acting as representatives in the following sections:
Example 1
Mrs T Briant is the secretary of Neame Chess Club. They open an account to hold the Chess Club funds. The account name is ‘Mrs T Briant, Neame Chess Club Secretary’.
If you pay or credit interest to this account, you’re paying the account owner (Mrs Briant) in their representative capacity for Neame Chess Club (a ‘non-individual’). This means you should report the account owner as a ‘non-individual’.
If you report Mrs Briant as an ‘individual’, the interest will be matched to their personal tax account. This will result in an incorrect tax charge for Mrs Briant personally.
Example 2
Mr B Jones dies, and Mr S Clark acts as their personal representative. They open an account named ‘Mr S Clark as Personal Representative of Mr B Jones’ and interest is paid or credited to the account.
As the account was opened and used solely by Mr Clark in their capacity as a personal representative, you should categorise and report the interest as paid to a ‘non-individual’.
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.
Foreign currency accounts
Interest paid on a foreign currency account should be reported either in the foreign currency or in pound sterling. You must maintain a consistent format throughout your report.
Joint accounts
A joint bank account can comprise multiple joint account holders, most commonly it comprises of 2.
A joint account is reportable if any of the account holders is a reportable person. Where practicable, return the names of all reportable joint account holders. Otherwise return the first named reportable joint account holder.
Inclusion of all reportable joint account holders enables HMRC to match the data with customer accounts.
You should always report the total amount of interest paid.
Partnerships
The term ‘partnership’ includes ordinary, limited liability and limited partnerships.
Different reporting scenarios may occur depending on the information you hold relating to the partnership.
All partnerships are reported in the same way:
- account name: name of the account
- participant name: name of the partnership
Partnerships: designated and undesignated client accounts
Some partnerships, such as solicitors, often hold money on behalf of their clients.
A ‘designated client account’ is one opened to hold funds on behalf of a specific client. You should report interest as paid to your customer’s client if:
- the interest from this account is passed on to the client
- you hold the client’s details
Example
| Details | |
|---|---|
| Account name | Spencer Solicitors (Mrs E Childs) |
| Participant | Mrs E Childs |
| Participant details to be reported | Details for Mrs E Childs |
An undesignated client account, (a general client account) is one used to hold funds on behalf of several different clients. In these cases, you report the interest as paid to your customer.
| Details | |
|---|---|
| Account name | Spencer Solicitors (client account) |
| Participant | Spencer Solicitors (client account) |
| Participant details to be reported | Details for Spencer Solicitors |
Where practicable, you should give designated and undesignated client accounts a name that reflects the purpose of the account. This will help HMRC differentiate between the 2.
For example:
- designated client account: Spencer Solicitors (Mrs E Childs)
- undesignated client account: Spencer Solicitors (client account)
Even if you suspect that interest paid was not passed on to the client, you should still include it on your return. HMRC will make enquiries directly with the customer if necessary.
Designated client accounts and undesignated client accounts should not be confused with designated accounts (specifically accounts that enable investments to be bought by an adult and designated in the name of a child).
Trusts
A trustee manages money or assets in a trust on behalf of that trust’s beneficiaries.
Categorise the participant type as ‘non-individual’ on your return if the account holder is identifiable as a trustee.
Charities, clubs and organisations
Categorise the participant type as ‘non-individual’ on your return if the account holder is acting as either the:
- trustee of a charity or foundation
- office bearer or representative of a club or organisation (such as treasurer or secretary)
Deceased investors
Interest is chargeable to tax from the date it is paid or credited to the account. For an individual to be chargeable, they must have received or benefitted from an entitlement to that interest.
If the person who holds a bank account has died, you do not apportion the interest paid to the account.
Account holder alive on the date interest paid or credited to the account
The account holder will receive or benefit from an entitlement to the interest. This means they’re chargeable and you should report them on your return.
Account holder dies before interest paid or credited to the account
The account holder will not have received or benefited from an entitlement to the interest. This means they are not chargeable.
Their personal representative or executor will receive or benefit from entitlement to the interest from the date of death. This means they are chargeable.
However, because they are acting in a representative capacity, they should be categorised as ‘non-individual’. This will prevent:
- the interest from being wrongly treated as personal income of the personal representative or executor
- tax being incorrectly charged on them personally
Example
Mr B Smith holds a bank account, but dies on 28 February. The bank pays interest into their account on 31 March. This means they received no benefit from receipt of, or entitlement to, the interest.
You were notified that Mr Smith had died and given the details of their personal representative. You changed the account name from Mr B Smith to ‘The Executor of Mr B Smith (Deceased)’.
You should report the interest as paid to:
- account name: The Executor of Mr B Smith (Deceased)
- participant name: The Executor of Mr B Smith (Deceased)
- participant type: ‘N’
Interest paid or credited through the period of executorship should be reported to its respective tax year.
Joint accounts when one account holder dies
If both account holders are alive on the date interest is paid or credited to the account, they’re both chargeable. It’s reasonable to assume a 50-50 split.
If one account holder dies before the date the interest is paid or credited to the account, the surviving account holder is chargeable.
Accounts opened by individuals acting as personal representatives
In this case, you should strongly advise customers to name the account so it’s clear they represent another person.
Otherwise they could be personally chargeable to tax on interest paid or credited to that account.
Late notification of death of an account holder
If you are not immediately informed of a customer’s death, you should make your return based on the facts known to you at the time.
The interest you report is governed entirely by both:
- the date of death of the account holder
- the date the interest was paid or credited into the account
A situation may arise where a UK bank (as a deposit-taker) pays interest on an account, held by the same UK bank as the executor. See Joint accounts if there is more than one executor.
Executors should only report interest they’ve been paid or credited once they’ve assigned the assets that gave rise to it to a beneficiary who is a reportable person.
You should only report interest paid from the date those assets were assigned to that beneficiary.
Sharia accounts
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’.
Addresses
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
Individuals
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.
Non-individuals
You should return the address relevant to the type of non-individual, so for a company you would return the registered office. If you do not hold this, the correspondence address is acceptable.
For example, you do not hold the registered office address of a company, but you think it may be a French company. The only address you hold from your ‘Know your customer’ checks is a UK address so you must include the interest paid to that company on your return.
‘Gone away’ and dormant accounts
Report the last known address if an account is marked ‘gone away’ at the time the BBSI return is run and interest has already been paid or credited. This should be a UK address.
If an account is dormant for 15 years, the money (with all interest outstanding) should be transferred to a reclaim fund or equivalent charity scheme.
You do not need to report the interest when you transfer money to a reclaim fund. Only report it if the owner comes forward and reclaims the money from the fund.
Report the total interest (accrued but not reported whilst unclaimed) in the tax year the owner comes forward.
Closed accounts
Include any interest paid or credited to the account if the investor had a UK address on the date the account was closed.
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 as a financial institution) 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 a Bank or Building Society Interest return guidance.
Penalties
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.
Appendix A
Do not report interest payable to the following central monetary institutions and international organisations designated by order under section 774 of the Income Tax (Trading and Other Income) Act 2005.
| Organisation | Statutory instrument number |
|---|---|
| The Asian Development Bank | SI 1984/1215 |
| The African Development Bank | SI 1984/1634 |
| The European Economic Community | SI 1985/1172 |
| The European Coal and Steel Community | SI 1985/1172 |
| The European Atomic Energy Community | SI 1985/1172 |
| The European Investment Bank | SI 1985/1172 |
| The European Bank for Reconstruction and Development | SI 1991/1202 |