• .\ person intrusted with the payment of dividends, who shall perform all necessary acts so that the income tax thereon may be assessed and paid, shall be entitled to receive as remuneration an allowance of so much •not being less than threepence) in the pound of the amount paid as may from time to time be fixed by the Commissioners of the Treasury.
•' Provided that this Section shall not impose on any banker or other person the obligation to disclose any particulars re lating to the affairs of any person on whose behalf he may be acting." Where a banker has taken a mortgage for a fixed amount, and the period of the loan is not less than a year, income tax must be deducted by the banker before charging the customer with the interest. In such a case the relation of banker and customer is changed to that of mortgagor and mortgagee, and a mortgagor is entitled under Section 40 of the Property Tax Act, 1853, to have income tax deducted from the interest pay able on his mortgage. In a case of a fixed mortgage, simple interest only can be charged. (See INTEREST.) Where a banker is required to deduct tax from the interest due upon a fixed mortgage. any such sum so deducted must be allowed for when the banker makes his income tax return; that is to say, before arriving at the amount of tax which he must pay upon his year's profits, he must allow for the amount which he has in effect already paid by having allowed it, by way of a reduction of interest, to the mortgagor.
A hanker does not deduct income tax from the interest charged on a current account or an ordinary loan. The customer must make his own claim for repayment of tax in respect of bank interest. For that purpose a banker supplies, when requested by a customer, a certificate, which may be given in the following prescribed form : " 1, the undersigned Manager of the British Bank, Ltd., hereby certify that the sum of has been charged to John Brown as interest for the twelve months ended December 31, 19 . This interest was
received from John Brown in full. without deduction of income tax. and has been included by the bank as part of their profits. in respect of which an assessment has been made and duty paid under Schedule D of the Income Tax Acts. The security held by the hank in respect of the advance in quest ion amounting to i is as follows : ." This is the form of certificate as issued by the income tax authorities. It should be noted that the certificate must include only interest, and not commission or any other charges.
Some dividends are declared free of income tax, the tax being paid by the company, and the shareholder receives the full rate of dividend, whilst in other cases the tax is deducted from the amount payable to the shareholder. It has been the custom of many banks to pay their dividends free of income tax, but various banks are consider ing the desirability of paying dividends less income tax. When the tax is deducted, the top half of the dividend warrant certifies the deduction and is used as a voucher by any shareholder claiming exemption or abatement. When a dividend is paid free of income tax, the tax may be recovered by anyone entitled thereto. In reclaiming tax on dividends paid " free of income tax," the gross amount of dividend may be entered on the return, that is, the amount which the dividend would have been if it had not been paid free of tax. e.g. a dividend of 05, with the tax at Is., may be treated as 000, and, if belonging to a person entitled to exemp tion, will be repaid, i.e. the tax upon 000. In the same way, such a dividend belonging to a person liable to tax must be entered in his return as £100, not £95. If he has other income, say, L1302, his total income would not be g397 but 1702, and he would not be entitled to any abatement.
The income tax certificate issued by a bank to shareholders who require it may be in the followims form :—