The EU Savings Tax Directive

Frequently asked questions

• What is the European Union (EU) Savings Tax Directive?
• When did reporting begin?
• What is a prescribed territory?
• Who is affected by the scheme?
• I am a UK resident with NS&I products – am I affected?
• What happens if I am a UK resident with investments in one of the prescribed territories?
• Individuals resident outside of the EU
• What is an information exchange country?
• What is a ‘Withholding Tax’ or Retention Tax regime?
• How much tax is withheld?
• I live in a country which is operating a withholding tax regime - why should I provide identity documentation?
• What does this mean in terms of providing identity documentation to NS&I?
• Which of my details will you pass to HMRC (the UK tax authority)?
• What documentation will customers be asked to supply?
• What do you mean by ‘certified copies’?
• What do you mean by a letter or notification from my local tax authority, which must include my name and current address?
• Is a birth certificate an acceptable identity document?
• Which NS&I investments will be reported to HMRC?
• But I only have tax-free savings and investments from NS&I, so why am I affected?
• What will happen to the information supplied?
• I understand details of my savings are already reported to HMRC because I have taxable investments with  NS&I - what is the change?
• I do not live in a prescribed territory -how am I affected?
• What happens if I move from one of the prescribed territories to a non-prescribed territory?  I presume my details will then not be reported?
• Does my country of residence allow me to hold tax-free savings and investments with NS&I?
• Where can I find the HMRC guidance notes on implementing the EU Savings Tax Directive?
• Why didn’t HM Revenue Customs write to me directly asking for information?
• NS&I is supposed to be independent - why are you collecting tax information for the Government?
• What about my rights under the 1998 Data Protection Act?
• How can I find out more?

What is the European Union (EU) Savings Tax Directive?

The EU Savings Tax Directive is legislation relating to Tax in EU Member States and associated territories. The main purpose of the Directive is to allow the tax authorities in EU Member States and associated territories to share information about savings income payments (i.e. interest payments) made to individuals. This is to help ensure that savers and investors pay the right amount of tax on their savings income and to counter cross border tax evasion within the EU.

There are two systems operating under the Directive, ‘information exchange’ and ‘withholding tax’, and EU Member Sates and associated territories can decide which system to adopt. The UK is currently operating under an ‘information exchange’ regime.

NS&I, as a UK paying agent (paying agents are any institutions/individuals who pay out savings income) is required to make an annual report to HM Revenue & Customs (HMRC). HMRC will exchange this information with the tax authority of the country concerned.

The scheme builds on the current reporting arrangements, requiring UK businesses and public bodies to provide information to HMRC about interest payments.

When did reporting begin?

The first savings income reports were made to HMRC by the end of June 2006 and covered the period 1 July 2005 to 5 April 2006. After the first reporting year the reports will cover a full tax year.

What is a prescribed territory?

Prescribed territories are all the EU Member States and other associated territories for which UK paying agents (including NS&I) are required to report upon. This means that for any customers resident in one of the areas listed below, NS&I must collect information and report it to the HMRC. HMRC in turn is expected to pass this information to the tax authority in the territory concerned More countries may be added in the future if the necessary agreements are made.

Who is affected by the scheme?

Any individual whose country of residence (that is, where they permanently live) is one of the prescribed countries (listed previously) and has savings or investments in another prescribed territory, including the UK.

I am a UK resident with NS&I products – am I affected?

No.  If you are paid savings income only by financial institutions in the UK, including NS&I, and you pay tax in the UK, then you are not affected by the Directive. The Directive only covers cross country payments.

What happens if I am a UK resident with investments in one of the prescribed territories?

The fiscal authorities in the Member State/prescribed territory are expected to report information about your savings income from your investments to HMRC.  The information HMRC receives will enable them to ensure that savings income earned abroad is properly reported and taxed.

Individuals resident outside of the EU

Individuals that are resident outside the EU are generally not affected, however if you hold a passport issued by an EU Member State you should continue to read on or click here to find out if you are.

What is an information exchange country?

Those countries operating an information exchange system have to disclose information on individuals and the interest received on their savings to their national tax authority. The identity of the recipient will be reported.

What is a ‘Withholding Tax’ or Retention Tax regime?

Some countries are withholding tax from savings income paid to individuals. In the Isle of Man this will be known as a ‘Retention Tax’. These countries are: Austria, Belgium, Luxembourg, British Virgin Islands, Guernsey, Isle of Man, Jersey, Netherlands Antilles. Paying agents in these countries will be withholding tax from savings income they pay.  Each country had the option whether they would adopt a withholding tax or not.  The UK chose not to adopt the tax.

Those countries which operate the withholding tax also have to report interest paid on savings to the resident’s tax authority. They must indicate how much of the total amount relates to customers in each prescribed territory. The identity of the recipient will not be reported, thus preserving individual confidentiality.

How much tax is withheld?

Under the Directive, 15% will be withheld during the first three years from the start of the scheme in 2005, 20% during the next 3 years, and 35% after that.

I live in a country which is operating a withholding tax regime - why should I provide identity documentation?

Although your country of residence is operating a withholding tax regime, the UK isn’t. That’s why you have been asked for your identity documentation.

What does this mean in terms of providing identity documentation to NS&I?

For any customers who started saving with NS&I prior to 1 January 2004 (ie called a ‘pre-January 04 contractual relationship’) NS&I will report your details with current information held in our records to HMRC. 

The exception to this is if you have held savings with NS&I and your monies have been repaid prior to January 04 and you then bought new products on or after 1 January 2004.

For customers who began saving with us on or after 1 January 2004 (‘post-January 04 contractual relationship’) NS&I will establish your name, address and Tax Identification Number (TIN) if you have one and the date and place of birth to fulfil our reporting obligations under the EU Directive. The name and place of birth must be established from a certified copy of your passport or official identity card. Your TIN, if you have one, must be established from the certified copy of a letter/notification from your local tax authority (which must include your name and address).

Which of my details will you pass to HMRC (the UK tax authority)?

Along with the usual reporting information such as name and address, we will be reporting the amount of savings income (i.e. interest payments, including any Premium bond prizes) you receive during the tax year. Your TIN, if you have one, will also be reported or details of your date and place of birth.

What documentation will customers be asked to supply?

New non UK resident customers (including children) that have opened accounts with NS&I after 1 January 2004 will be asked to supply:

What do you mean by ‘certified copies’?

NS&I is following explicit guidelines produced by HMRC and can only accept correctly certified copies.. This means a copy certified by an Embassy, Consulate or High Commission of the country of issue or by a lawyer or attorney. The copy must be dated and signed “Original seen”. When copying passports you do not need to include any blank pages or pages containing visa stamps.

For residents of Channel Islands and the Isle of Man only: copies can also be certified by a professional person such as a banker, authorised financial intermediary, mortgage broker regulated by the local financial services regulator, teacher, doctor, minister of religion or civil servant. The person signing the copy must give their full name, address and occupation. 

Sending incorrectly certified copies of documents will delay processing of your application.

What do you mean by a letter or notification from my local tax authority, which must include my name and current address?

This means NS&I will accept any letter or notification from your local tax authority showing your name and address, not just one specifically stating that you are resident for tax purposes.

Is a birth certificate an acceptable identity document?

Certified copies of birth certificates are only acceptable identity documents for children. However, we ask that you do try and provide a copy of the child’s passport or national identity card if possible.

Which NS&I investments will be reported to HMRC?

All products that can be held by customers resident overseas will be reported to HMRC, which means all NS&I products, will be reported.

But I only have tax-free savings and investments from NS&I, so why am I affected?

NS&I’s tax-free savings and investments are free of UK Income Tax and Capital Gains Tax. However, if you live outside the UK any prizes or returns you receive may be liable to tax in your country of residence.

What will happen to the information supplied?

It will be reported to HMRC at the end of each tax year, together with any savings income paid. HMRC is expected to forward the information to the tax authority in your country of residence, to ensure that you are paying the correct amount of tax.

I understand details of my savings are already reported to HMRC because I have taxable investments with  NS&I - what is the change?

Yes, some customer details are already reported to HMRC for interest paid or received on NS&I products (as required under Section 17 and 18 of the Taxes Management Act 1970). These arrangements remain in place.  However we are now required to report information on all products (including those that are tax-free in the UK) for people who are resident in a prescribed territory.

I do not live in a prescribed territory -how am I affected?

You may still be affected by the EU Directive even though you do not live in an EU Member State or one of the associated territories. In these circumstances the country of residence is deemed to be the EU Member State/associated territory that issued your passport or national identity card unless you can produce a certificate of residence for tax purposes by the country in which you live. If you are unsure, we suggest you seek guidance from your local tax advisor.

What happens if I move from one of the prescribed territories to a non-prescribed territory?  I presume my details will then not be reported?

You may still be affected by the EU Directive even if you move outside of the prescribed territories. In these circumstances the country of residence is deemed to be the EU Member State/associated territory that issued your passport or national identity card unless you can produce a certificate of residence for tax purposes by the country to which you have moved. If you are unsure, we suggest you seek guidance from your local tax advisor.

Does my country of residence allow me to hold tax-free savings and investments with NS&I?

This is a question you must ask your local tax authority or tax advisor.

Where can I find the HMRC guidance notes on implementing the EU Savings Tax Directive?

They are available at the HMRC website at:
http://www.hmrc.gov.uk/esd-guidance/

Why didn’t HM Revenue Customs write to me directly asking for information?

In line with the EU Directive, UK paying agents - of which NS&I is one - are required to submit an annual report to HMRC. It is the paying agent’s responsibility to  collect the required information and report to HMRC. HMRC is then expected to exchange this information with the tax authority of the prescribed territory concerned

NS&I is supposed to be independent - why are you collecting tax information for the Government?

NS&I, like all other financial providers across the EU, has to apply the European Union Savings Tax Directive and report information for all individuals who save with us. Individuals who have started to save for the first time with a provider after 1st January 2004 are required to provide specific information. All UK based ‘paying agents’ (of which NS&I is one) are required to make annual reports to HMRC.

What about my rights under the 1998 Data Protection Act?

Customers are required by law to provide the information prescribed by the EU Savings Tax Directive. Disclosure of this information is therefore exempt from the non disclosure provisions of the Data Protection Act 1998 by virtue of section 35(1) of the Act.

How can I find out more?

If you have any questions about what you need to send to National Savings and Investments, call us on +44 1253 832007. For more detail on the Directive itself, visit the HM Revenue and Customs website at www.hmrc.gov.uk or contact the tax authority in your country.

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