Certificate of Tax Deposit UK - Scheme by HMRC

What is a certificate of tax deposit?

Certificate of Tax Deposit (CTD) is a scheme offered by the UK government to the taxpayers of the country. The main objective of the CTD is to help the taxpayers avoid late payment of taxes. Other than this the scheme also allows taxpayers to earn an amount of interest on the money or payments made by them before the tax is due.

Who can all use CTDs?

Certificate of Tax Deposit (CTD) is an interactive method used by the UK government to aid its taxpayers. Here is a list of all of those who can make use of this scheme:

• Companies
• Individuals
• individuals in a partnership to pay off liabilities owed by them
• Trustee to pay liabilities of the trust
• Personal representative to pay off the liabilities owed by an estate’s owner.

What kind of taxes can be paid by making use of the Certificate of Tax Deposit (CTD) scheme?

Here is a list of taxes you can pay off by making use of your Certificate of Tax Deposit (CTD):

• National Insurance contributions (Class 4)
• Petroleum Revenue Tax
• Capital Gains Tax, excluding Annual Tax on Enveloped Dwellings
• Self Assessment of Income Tax
• Inheritance Tax
• Corporation Tax (only 6 series or certificates purchased before 1993)

How does Certificate of Tax Deposit (CTD) scheme work?

A taxpayer can make a deposit which will be monitored by the HMRC. Furthermore, the deposits can be made at any time, even before tax is due. Once you make your deposits, you will receive a letter from the HMRC stating that the deposit has been received.

CTDs can help you get rid of your tax liabilities and can earn you interest as well. Deposits with the HMRC and made under Certificate of Tax Deposit (CTD) scheme can earn you interest for at least 6 years. The interest may be added to the deposits that you make as per the time you make your payments.

What kind of interest will you receive on your deposits?

Deposits made under the Certificate of Tax Deposit (CTD) scheme earns you interest on the deposits. However, the interest rates that you will receive as per the rates that are mentioned in the letter that you receive from the HMRC after you make your deposits. The interest rates or the amount of interest that you receive depends on the following:

• When you make the deposit
• How much money is left after the tax is deducted?

What happens when you make your deposits before your tax due date?

When you make your payments before your due date, the money is deposited in your account under the Certificate of Tax Deposit (CTD) scheme. The amount you deposits here will earn interest as per the given rate. And when the due date for your tax arrives, the tax will be automatically deducted from your account or the deposits without attracting any late payment charges for tax due.

What happens if you deposit your money after your tax due date?

It is possible for you to pay your tax amount or liability after the due date has passed. However, you will not gain any interest on the deposit as the amount is paid after your tax was due.

Furthermore, you will be liable to pay a late payment fee for your late tax paid.

What kind of interests will you receive?

Without a fixed amount as your deposit you will not receive any kinds of interest on the amount. Find the list below helpful:

• An amount below £100,000 will not receive any interest even if paid before the due date.
• Funds of £100,001 or more held below a one month will not receive any interest.
• £100,001 or more held for more than a month will receive an interest with the rate of :
• Cash rate: 0.25%
• Tax rate: 0.75%

If you are eligible to receive interest on your deposits, then you will receive a daily interest of on the deposits. You will be paid until:

• The sixth anniversary of your certificate.
• The day you withdraw all the money.

Although you can let your funds under HMRC, your deposits will not earn interest after 6 years.

Also, as of December 2017, this scheme stands closed. Also, if there are any payments to be made against the now on-going certificates, after 23 November 2023, then you should contact the HMRC with all the relevant results and apply for a refund.

How to pay tax with the Certificate of Tax Deposit (CTD) scheme?

Although you cannot enter in this scheme now, you can use the Certificate of Tax Deposit (CTD) scheme as per your wishes. Once you make a deposit, you need to write a written letter with instructions that offers that provides instructions as to how the funds need to be used.

If there are more than one kinds of liabilities that you need to pay with your deposit, then you can send in an instruction written specifying the order of payments to be made from your deposits. The letter with all the instructions needs to be sent to the HMRC’s CTD Team.

It will take about 10 to 14 days for the team to process your instructions and requirements.

If you do not want the HMRC to process the payment in full, then you need to instruct the team or the HMRC as to what to do with the remaining amount. If you do not wish to utilize the entire deposit for your tax liability then you can:

• Withdraw the money in cash, or
• Have the HMRC issue you a certificate that can be used later to pay off any other kind of liability in future.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.