22/94                                   29 November 1994

   BANK INTEREST:  DEPOSITS BELONGING TO DISCRETIONARY &
                    ACCUMULATION TRUSTS

The  Chancellor proposes in his Budget to change  the tax treatment
of  bank  interest paid  to  discretionary  and accumulation trusts.

From  6  April  1996 interest credited  to  bank accounts belonging
to discretionary and accumulation trusts will be subject to deduction
of tax at the basic rate.

The Chancellor's intention is to put the treatment of such bank
interest onto the same footing as the interest  paid by building
societies  and  other  deposit-takers.   The change will also help to
simplify self assessment for many of the trustees affected.


                          DETAILS

1.   At  present  bank interest on deposits  belonging to
discretionary and accumulation trusts is paid  gross, that is without
deduction of tax.  It is outside  the scope  of  the  tax deduction
at source scheme  which applies  to  interest  on most accounts  with
banks, building  societies and certain other deposit-takers,
including local authorities.

2.   With  effect from 6 April 1996 the rules of the banks scheme are
to be extended to cover deposits belonging to discretionary and
accumulation trusts.

3.   To  enable the banks to switch existing accounts from paying
gross interest to paying it under deduction of tax  at source,
trustees will have to tell them about accounts  opened before 6 April
1995 which belong  to discretionary  or accumulation trusts.
Alternatively they  will have to provide details of these accounts
to  the Inland Revenue who will notify the banks.   A notification
form  will be included  with  the  next Trust Return issued to
trustees.

4.   Trusts  which  have  no connection  with  the United Kingdom
will  be able to continue to  receive  their interest without
deduction of tax  if  the  trustees provide  the bank with a signed
declaration  to  that effect.

5.   The   Inland   Revenue   will  be   discussing with
representatives   of   the   financial   institutions
involved the detailed procedures for implementing the proposed change.

6.   The  proposals will have a negligible effect in
terms of Exchequer yield but should reduce compliance costs for
many of the trusts affected.


                     NOTES FOR EDITORS

1.   Since  the  abolition of composite rate  tax  from
6 April 1991  interest  on  most  accounts  held   by individuals
with banks, building societies and  other deposit-takers is paid or
credited after deduction of tax at the basic rate.

2.   Interest  belonging to people who are not ordinarily resident
in  the United Kingdom can be paid  without deduction  of tax if the
institution holds  a  signed declaration to that effect.

3.   Interest  paid  by  building  societies  and certain
deposit-takers  to  discretionary  and   accumulation trusts is
already subject to deduction of tax.