Regulation bites the banks?
The first new regulations on banking practices are presumably being drafted at the Treasury right now, following last week’s £500bn bail-out package from the government. Any bank accepting any component of the package was also required to accept the quid pro quo – that tighter regulation on banks would follow.
Regulations issued today might look more prosaic, and in fact continue the work of tidying up loose ends from the Tax Law Rewrite Project. However, they still reflect the overall new regime of proscribing banks’ behaviour more closely.
One set of regulations makes detailed provision for when deposit-takers and building societies are required to deduct tax from certain interest payments. Prior to the current Tax Law Rewrite project, the rules for deposit-takers were slightly different to those for building societies. The regulations continue the streamlining process, creating a unified regulatory regime applicable to both.
Supplementary to these regulations are new information powers regulations. These make changes to the existing requirement that banks and building societies make a return to HMRC of their annual interest payments – both received and paid out. The new regulations prescribe further information on top of this which must be supplied in certain circumstances. The circumstances prescribed, however, are not new and are contained within existing legislation. Essentially, the changes follow on from the fact that the interest payment rules have been simplified by the first set of regulations.