Under certain circumstances, companies (including non-resident companies trading from a branch or agency in the UK and local authorities) can have a duty to deduct tax in connection with certain payments. In effect the company accounts for all or part of the tax liability on behalf of the recipient of the payment.

For example, from:

• payments of yearly interest
• annual payments
• patent royalties
• royalties etc to a person who lives abroad
• the proceeds of a sale of patent rights paid to a non-UK resident
• chargeable payments connected with exempt distributions
• directions for deduction from payments to non-UK residents.

Companies (and various other entities) making these deductions are obliged to account for the amounts deducted using form CT61. HMRC is happy for the entries on these forms to give aggregated figures of amounts paid or credited and the tax deducted for the return period. However, the payments should be split for pre and post 5 April interest to reflect any change in the tax rate.