Taxes Consolidation Act 1997 section 261

Taxation of relevant interest, etc

Section 261 sets out the general framework for the tax treatment of deposit interest subject to DIRT, including how it is classified for income tax purposes, who may claim a repayment of DIRT, and how DIRT operates as a final liability tax for individuals.

• Building society share account dividends are treated as normal deposit interest, not as distributions, and are therefore subject to DIRT rather than dividend withholding tax.
• DIRT cannot be repaid except to companies within the charge to corporation tax, approved charities, individuals aged 65 or over, and individuals who are permanently incapacitated.
• Relevant interest is taxable under Case IV of Schedule D and must be included in the recipient's total income, with the portion equal to the interest charged at the same rate as the DIRT deducted.
• Credit is given for the DIRT deducted when computing the tax payable on the interest, effectively making DIRT a final liability tax for individuals.