Taxes Consolidation Act 1997 section 260

Provisions supplemental to sections 258 and 259

Section 260 provides for the accrual and collection of deposit interest retention tax (DIRT) on deposits where specified interest is not paid annually but is accumulated over a longer period, such as long-term savings products linked to stock market performance.

• Where interest on a deposit is not paid or credited annually (for example, interest linked to a stock exchange index payable only at the end of a fixed term), the interest is deemed to accrue from day to day and DIRT must be accounted for each year on the deemed accrued amount
• When the interest is finally paid at the end of the investment period, DIRT is deducted from the full payment, but DIRT already paid on the deemed accruals in earlier years is offset against the liability for the year of actual payment
• A derogation applies where a deposit taker calculates its interim DIRT payments based on the period from when the deposit was opened rather than from 1 January (section 258) or 5 October (section 259), provided all conditions are met
• The depositor's own tax position is unaffected — the depositor remains chargeable to DIRT only in respect of the year in which the interest is actually paid or credited