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(1) This Part makes provision about—
(a) accrued income profits and losses, and
(b) exemptions which apply where there is interest on securities.
(2) In this Part “accrued income profits” means profits which under Chapter 2 are treated as made where securities which carry or have carried interest are transferred.
(3) See sections 628, 630 and 670(2) and (3) for when such profits are treated as made.
(4) In this Part “accrued income losses” means losses which under Chapter 2 are treated as made where securities which carry or have carried interest are transferred.
(5) See section 628 for when such losses are treated as made.
(6) For the meaning of “securities”, “transfer” and “interest”, see sections 619, 620 and 671 respectively.
Income tax is charged on accrued income profits.
(1) Tax is charged under this Chapter on the full amount of the accrued income profits treated as made in the tax year.
(2) Accrued income profits within section 628(5) (profits treated as made where the settlement day falls within an interest period) are treated as made in the tax year in which the last day of the interest period in which the profits are treated as made falls.
(3) Accrued income profits within section 630(2) (profits treated as made where the settlement day falls after the end of the securities' last interest period) are treated as made in the tax year in which the settlement day for the transfer falls.
(4) Accrued income profits within section 670(2) or (3) (withdrawal of relief for unremittable transfer proceeds) are treated as made in the tax year in which the proceeds cease to be unremittable.
(5) Section 668(5) (when proceeds are unremittable) applies for the purposes of subsection (4) as it applies for the purposes mentioned in section 668(5).
(6) For the meaning of “interest period” and “the settlement day”, see sections 673 and 674 respectively.
(1) The person liable for any tax charged under this Chapter is the person treated as making the accrued income profits.
(2) But see section 666 (under which nominees and trustees may be disregarded).
(1) In this Chapter “securities” includes—
(a) any loan stock or similar security other than an excluded security, and
(b) shares in a building society which are qualifying shares for the purposes of section 117(4) of TCGA 1992 (qualifying corporate bonds),
but (subject to paragraph (b)) it does not include any shares in a company.
(2) For the purposes of subsection (1)(a), it does not matter—
(a) whether the security is of the government of the United Kingdom, any other government, any public or local authority in the United Kingdom or elsewhere, or any company or other body,
(b) whether or not the security is secured,
(c) whether or not the security carries a right to interest of a fixed amount or at a fixed rate percentage of the nominal value of the security, or
(d) whether or not the security is in bearer form.
(3) In this section “excluded securities” means—
(a) national savings certificates (including Ulster Savings Certificates as defined in section 693(7) of ITTOIA 2005),
(b) war savings certificates,
(c) uncertificated eligible debt security units as defined in section 986,
(d) certificates of deposit (see section 1019),
(e) a security which is a right falling within section 552(1)(c) of ITTOIA 2005 at the time of the transfer in question,
(f) a security that meets the redemption conditions (see subsection (5)), and
(g) a security that is a deeply discounted security within the meaning of Chapter 8 of Part 4 of ITTOIA 2005.
(4) But subsection (3)(g) does not include a security if, on its transfer, Chapter 8 of Part 4 of ITTOIA 2005 would apply subject to the rules in sections 454 to 456 of that Act (listed securities held since 26 March 2003).
(5) The redemption conditions are that—
(a) the security is redeemable,
(b) the amount payable on its redemption exceeds its issue price, and
(c) no return other than the amount of that excess is payable on it.
(6) Securities are treated as being of the same kind for the purposes of this Chapter if they—
(a) are treated as being of the same kind by the practice of a recognised stock exchange, or
(b) would be so treated if dealt in on such an exchange.
(1) References in this Chapter to the transfer of securities are—
(a) to the transfer of securities by way of sale, exchange, gift or otherwise,
(b) to the conversion of securities in any case where there is no transfer of the securities within paragraph (a),
(c) to the redemption of variable rate securities, or
(d) to a transaction or event treated as a transfer under—
(i) section 648(1) or (3) (strips of gilt-edged securities),
(ii) section 649(4) (new securities issued with extra return),
(iii) section 650(2), (4) or (6) (trading stock appropriations etc),
(iv) section 651(2) (owner becoming entitled to securities as trustee), or
(v) section 652(2) (securities ceasing to be held on charitable trusts).
(2) But subsection (1)(a) does not include—
(a) the vesting of securities in personal representatives on death, or
(b) the transfer of a security to which Chapter 8 of Part 4 of ITTOIA 2005 applies subject to the rules in sections 454 to 456 of that Act.
(3) For the purposes of this Chapter—
(a) a transfer of securities under an agreement takes place when the agreement is made, and
(b) the person to whom they are to be transferred under the agreement becomes entitled to them at that time.
(4) But in the case of a conversion of securities within subsection (1)(b), the transfer takes place on the day of the conversion.
(5) And in the case of a redemption of securities within subsection (1)(c), the transfer takes place on the day of the redemption.
(6) Subsection (1) is subject to—
section 648(7) (transactions forming part of exchanges concerning strips of gilt-edged securities),
section 653 (stock lending), and
section 655 (transfers under sale and repurchase arrangements).
(7) In this Chapter “conversion”, in relation to securities, has the meaning given by section 132 of TCGA 1992.
(1) In this Chapter “transferor” and “transferee” are to be read in accordance with section 620 (but this is subject to subsections (2) to (4)).
(2) In the case of a conversion of securities within section 620(1)(b)—
(a) the person who was entitled to the securities immediately before the conversion is treated as the transferor, but
(b) no one is treated as the transferee.
(3) In the case of a redemption of securities within section 620(1)(c)—
(a) the person who was entitled to the securities immediately before the redemption is treated as the transferor, but
(b) no one is treated as the transferee.
(4) The following provisions also contain rules about who is the transferor or the transferee for certain transfers—
section 648(1) to (4) (strips of gilt-edged securities),
section 649(4) and (5) (new securities issued with extra return),
section 650 (trading stock appropriations etc),
section 651(2) and (3) (owner becoming entitled to securities as trustee),
section 652(2) and (3) (securities ceasing to be held on charitable trusts), and
section 666 (certain transfers by or to nominees or trustees treated as made by or to others).
(5) See also sections 638 to 647 (excluded transferors and transferees).
(1) Different rules apply under this Chapter for the different kinds of transfer specified in subsection (2).
(2) The transfers are—
(a) transfers with accrued interest (see section 623),
(b) transfers without accrued interest (see section 624),
(c) transfers with unrealised interest (see section 625), and
(d) transfers of variable rate securities (see section 626).
(3) If a transfer is both a transfer with unrealised interest and a transfer of a kind specified in subsection (2)(a), (b) or (d), both the provisions of this Chapter applicable to transfers with unrealised interest and the provisions applicable to the other kind of transfer apply to the transfer.
(1) The general rule is that securities are transferred with accrued interest for the purposes of this Chapter if they are transferred with the right to receive interest payable—
(a) in a case where the settlement day is an interest payment day, on the settlement day, and
(b) in any other case, on the first interest payment day after the settlement day.
(2) But, in the case of the transfers specified in subsection (3), subsection (4) applies instead of subsection (1).
(3) The transfers are those treated as made under—
(a) section 620(1)(b) (conversion),
(b) section 650 (trading stock appropriations etc),
(c) section 651 (owner becoming entitled to securities as trustee), and
(d) section 652 (securities ceasing to be held on charitable trusts).
(4) If the person treated as the transferor had the right to receive interest payable as mentioned in subsection (1)(a) or (b), the securities are treated as transferred with accrued interest.
(5) This section is subject to section 626 (transfers of variable rate securities).
(6) See also—
section 648(6) (certain exchanges of strips treated as transfers with accrued interest), and
section 649(4) (issue of new securities with extra return treated as transfer with accrued interest).
(1) The general rule is that securities are transferred without accrued interest for the purposes of this Chapter if they are transferred without the right to receive interest payable as mentioned in section 623(1)(a) or (b).
(2) But, in the case of the transfers specified in subsection (3), subsection (4) applies instead of subsection (1).
(3) The transfers are those treated as made under—
(a) section 620(1)(b) (conversion),
(b) section 650 (trading stock appropriations etc),
(c) section 651 (owner becoming entitled to securities as trustee), and
(d) section 652 (securities ceasing to be held on charitable trusts).
(4) If the person treated as the transferor did not have the right to receive interest payable as mentioned in section 623(1)(a) or (b), the securities are treated as transferred without accrued interest.
(5) This section is subject to section 626 (transfers of variable rate securities).
(6) See also section 648(5) (certain exchanges of strips treated as transfers without accrued interest).
(1) For the purposes of this Chapter securities are transferred with unrealised interest if they are transferred with the right to receive interest payable on an interest payment day falling before the settlement day.
(2) Such interest is referred to in this Chapter as “unrealised interest”.
(1) Sections 623 and 624 do not apply to transfers of variable rate securities.
(2) Such transfers are not treated as transfers with accrued interest or transfers without accrued interest.
(1) For the purposes of this Chapter securities are “variable rate securities” unless their terms of issue provide that throughout the period from issue to redemption (whenever redemption might occur) they are to carry interest at a rate which falls into one, and one only, of the categories specified in subsection (2).
(2) The categories are—
(a) a fixed rate which is the same throughout the period,
(b) a rate which bears the same fixed relationship to a standard published base rate throughout the period, and
(c) a rate which bears the same fixed relationship to a published index of prices throughout the period.
(3) In subsection (2) “published index of prices” means the retail prices index or any similar general index of prices which is published by the government of any territory outside the United Kingdom or by an agent of such a government.
(4) In determining whether new securities (within the meaning of section 649 (new securities issued with extra return)) are variable rate securities, the interest payable on them on the first interest payment day after their issue is treated as payable in respect of the period beginning with the relevant period and ending with that day.
(5) In subsection (4) “the relevant period” has the meaning given by section 649(8).
(1) This section sets out the general rule for determining whether a person is treated as making accrued income profits or accrued income losses where securities are transferred by or to the person.
(2) This section does not apply in a case where section 630 applies.
(3) A separate calculation is to be made for each kind of security that is transferred by or to the person and for each interest period of each such kind of security.
(4) Each such calculation is to find—
(a) the total amount (“A”) of the payments treated under this Chapter as made to the person in the interest period in question in respect of transfers of securities of the particular kind, and
(b) the total amount (“B”) of the payments treated under this Chapter as made by the person in that period in respect of such transfers.
(5) A person is treated as making accrued income profits in an interest period as a result of transfers of securities of a particular kind if A exceeds B.
(6) A person is treated as making accrued income losses in an interest period as a result of transfers of securities of a particular kind if B exceeds A.
(7) For the payments that are treated as made on transfers of different kinds, see—
section 632 (payment on transfer with accrued interest),
section 633 (payment on transfer without accrued interest),
section 634 (payment on transfer with unrealised interest),
section 635 (payment on transfer of variable rate securities), and
section 637(2) (accrued income losses treated as payment on transfer in next interest period).
(8) See also—
section 638(2) (no account to be taken of any payment treated as made by or to excluded transferor or transferee), and
Chapter 3 (exemptions relating to interest on securities).
(1) If section 628(5) applies, the amount of the accrued income profits treated as made is equal to the excess mentioned in section 628(5).
(2) If section 628(6) applies, the amount of the accrued income losses treated as made is equal to the excess mentioned in section 628(6).
(1) This section applies if—
(a) there is a transfer of securities with unrealised interest or a transfer of variable rate securities, and
(b) the settlement day for the transfer falls after the end of the only or last interest period of the securities.
(2) The transferor is treated as making accrued income profits.
(3) See also—
section 638(3) (no account to be taken of transfer if transferor is excluded transferor), and
section 681 (exemption for unrealised interest received by transferee after transfer).
(1) In the case of a transfer of securities with unrealised interest to which section 630 applies, the amount of the accrued income profits treated as made is equal to the unrealised interest.
(2) Subsection (1) is subject to section 660 (transfers with unrealised interest: interest in default).
(3) In the case of a transfer of variable rate securities to which section 630 applies, the amount of the accrued income profits treated as made is such amount as is just and reasonable.
(1) In the case of a transfer of securities with accrued interest, for the purposes of this Chapter a payment is treated as made by the transferee to the transferor in the interest period in which the settlement day falls.
(2) The amount of that payment depends on whether the transfer is under an arrangement by which the transferee accounts to the transferor separately—
(a) for the consideration for the securities, and
(b) for gross interest accruing to the settlement day.
(3) If the transfer is under such an arrangement, the amount of the payment is the amount of gross interest which the transferee accounts for.
(4) If—
(a) the transfer is not under such an arrangement, and
(b) the settlement day is itself an interest payment day for the securities,
the amount of the payment is the amount of interest payable on the securities on that day.
(5) If—
(a) the transfer is not under such an arrangement, and
(b) the settlement day is not an interest payment day for the securities,
the amount of the payment is an amount equal to—
where—
I is the interest payable on the securities on the first interest payment day after the settlement day (“the payment day”),
A is the number of days in the period beginning with the first day on which that interest accrues and ending with the settlement day, and
B is the number of days in the period beginning with the first day on which that interest accrues and ending with the payment day.
(6) For the purposes of subsection (5), the first day on which that interest accrues is taken to be—
(a) the day after the last interest payment day before the settlement day, or
(b) if there was no interest payment day before the settlement day, the first day of the first interest period of the securities.
(7) In a case where no one is treated as the transferor (see sections 648(4) and 649(5)), this section has effect as if—
(a) in subsection (1) the words “to the transferor” were omitted, and
(b) subsections (2), (3), (4)(a) and (5)(a) were omitted.
(8) In a case where no one is treated as the transferee (see sections 621(2) and (3) and 648(2)), this section has effect as if—
(a) in subsection (1) the words “by the transferee” were omitted, and
(b) subsections (2), (3), (4)(a) and (5)(a) were omitted.
(9) Subsections (2) to (5) are subject to section 662 (new securities issued with extra return: special rules about payments).
(10) Subsections (4) and (5) are subject to section 659 (transfers with or without accrued interest: interest in default).
(1) In the case of a transfer of securities without accrued interest, for the purposes of this Chapter a payment is treated as made by the transferor to the transferee in the interest period in which the settlement day falls.
(2) The amount of that payment depends on whether the transfer is under an arrangement by which the transferor accounts to the transferee for gross interest accruing from the settlement day to the next interest payment day.
(3) If the transfer is under such an arrangement, the amount of the payment is the amount of gross interest which the transferor accounts for.
(4) If—
(a) the transfer is not under such an arrangement, and
(b) the settlement day is itself an interest payment day for the securities,
the amount of the payment is nil.
(5) If—
(a) the transfer is not under such an arrangement, and
(b) the settlement day is not an interest payment day for the securities,
the amount of the payment is an amount equal to—
where—
I is the interest payable on the securities on the first interest payment day after the settlement day (“the payment day”),
A is the number of days in the period beginning with the day after the settlement day and ending with the payment day, and
B is the number of days in the period beginning with the first day on which that interest accrues and ending with the payment day.
(6) For the purposes of subsection (5), the first day on which that interest accrues is taken to be—
(a) the day after the last interest payment day before the settlement day, or
(b) if there is no interest payment day before the settlement day, the first day of the first interest period of the securities.
(7) In a case where no one is treated as the transferor (see section 648(4)), this section has effect as if—
(a) in subsection (1) the words “by the transferor” were omitted, and
(b) subsections (2), (3), (4)(a) and (5)(a) were omitted.
(8) In a case where no one is treated as the transferee (see sections 621(2) and (3) and 648(2)), this section has effect as if—
(a) in subsection (1) the words “to the transferee” were omitted, and
(b) subsections (2), (3), (4)(a) and (5)(a) were omitted.
(9) Subsection (5) is subject to section 659 (transfers with or without accrued interest: interest in default).
(10) See also section 663(2) (reduction of amount of payment under this section where transfer to maker of manufactured payments).
(1) In the case of a transfer of securities with unrealised interest where the settlement day falls within an interest period, for the purposes of this Chapter a payment is treated as made to the transferor in that period.
(2) The amount of the payment is equal to the unrealised interest.
(3) Subsection (2) is subject to section 660 (transfers with unrealised interest: interest in default).
(4) No one is treated as making the payment.
(5) Accordingly, the payment is not brought into account in determining whether the transferee is treated as making accrued income profits or losses under section 628.
(6) But see section 681 (exemption for unrealised interest received by transferee after transfer).
(7) See section 630 for the rules that apply to transfers of securities with unrealised interest where the settlement day falls outside an interest period.
(1) In the case of a transfer of variable rate securities where the settlement day falls within an interest period, for the purposes of this Chapter a payment is treated as made to the transferor in that period.
(2) The amount of the payment is such amount as is just and reasonable.
(3) No one is treated as making the payment.
(4) Accordingly, the payment is not brought into account in determining whether the transferee is treated as making accrued income profits or losses under section 628.
(5) See section 630 for the rules that apply to transfers of variable rate securities where the settlement day falls outside an interest period.
(1) This section applies if—
(a) an individual who is entitled to securities dies, and
(b) the securities are transferred by the personal representatives to a legatee.
(2) If the securities are transferred in the interest period in which the death occurs, no payment is treated as made under this Chapter as a result of the transfer.
(3) If the securities are variable rate securities and the deceased dies after the end of the only or last interest period of the securities, no accrued income profits are treated as made under section 630(2).
(4) In this section “legatee” includes any person taking (whether beneficially or as trustee)—
(a) under a testamentary disposition, or
(b) on an intestacy or partial intestacy.
(5) Such a person includes a person taking as a result of an appropriation by personal representatives in or towards the satisfaction of a legacy or other interest or share in the deceased’s property.
(1) This section applies if—
(a) a person is treated as making accrued income losses in an interest period as a result of transfers of securities, and
(b) the period does not end with an interest payment day.
(2) For the purposes of this Chapter the person is treated as making a payment on a transfer of the securities in the next interest period equal to the amount of the losses.
(3) For cases where the period does end with an interest payment day, see sections 678 to 680 (exemptions for interest on securities involving accrued income losses).
Income Tax Act 2007