Dormant bank and building society accounts
New regulations came into force on 1 February 2011 which modify the tax rules for interest credited to a dormant bank or building society account. The regulations specifically concern monies transferred to the reclaim fund.
The reclaim fund is designed to make use of monies held in dormant bank accounts for the benefit of social or environmental community projects. The account holder retains the rights to repayment although this will be made to the reclaim fund if the monies have already been transferred.
A dormant account is defined as an account which has been continually open for at least fifteen years during which time no transactions have been carried out by the account holder or at his instruction.
Under the new regulations interest credited whilst the funds are held in the reclaim fund is only to be treated as paid for the purposes of income tax and tax reporting requirements if a customer reclaims his money from the fund and the balance is repaid.
HMRC have also updated their ‘Dormant Account – FAQs’ following the introduction of the new regulations.