Office of Public Sector Information
PART 12 continued CHAPTER 2 continued
(1) This section applies if there is a transfer of securities in relation to which a person (“P”) is an excluded transferor or excluded transferee.
(2) In determining whether P has made accrued income profits or accrued income losses under section 628 (making accrued income profits and losses: general rule) and the amount of any such profits or losses, no account is to be taken of any payment treated as made by or to P on the transfer.
(3) In determining whether P has made accrued income profits under section 630 (making accrued income profits: settlement day outside interest period) and the amount of any such profits, no account is to be taken of the transfer if P is an excluded transferor in relation to it.
(4) For the cases where a person is an excluded transferor or excluded transferee in relation to a transfer, see—
section 639 (small holdings: individuals),
section 640 (small holdings: personal representatives),
section 641 (small holdings: trustees of a disabled person’s trusts),
section 642 (traders),
section 643 (non-residents),
section 644 (individuals to whom the remittance basis applies),
section 645 (charitable trusts etc),
section 646 (pension scheme trustees), and
section 647 (makers of manufactured payments).
(5) Whether a person is an excluded transferee is also relevant to the application of section 681 (exemption for unrealised interest received by transferee after transfer).
(1) In relation to a transfer with accrued interest or transfer without accrued interest, an individual is an excluded transferor or excluded transferee unless the nominal value of securities held by the individual exceeds £5,000 on any day—
(a) in the tax year in which the interest period ends, or
(b) in the previous tax year.
(2) In relation to a transfer with unrealised interest, an individual is an excluded transferor or excluded transferee unless the nominal value of securities held by the individual exceeds £5,000 on any day—
(a) in the tax year in which the settlement day falls, or
(b) in the previous tax year.
(3) In relation to a transfer of variable rate securities, an individual is an excluded transferor unless the nominal value of securities held by the individual exceeds £5,000 on any day in the relevant tax year or the previous tax year.
(4) In subsection (3) “the relevant tax year” means—
(a) if the settlement day falls in an interest period, the tax year in which the interest period ends, or
(b) otherwise, the tax year in which the settlement day falls.
(5) For the purposes of this section, if—
(a) an individual holds securities at a particular time, and
(b) any interest on them which became payable at that time would be treated for income tax purposes as part of another individual’s income,
each of those individuals is treated as holding at that time the securities which the other holds, as well as those which that individual actually holds.
(1) In relation to a transfer with accrued interest or transfer without accrued interest of securities that form part of a deceased person’s estate, the deceased’s personal representatives are an excluded transferor or excluded transferee unless the nominal value of securities held by the deceased’s personal representatives as such exceeds £5,000 on any day—
(a) in the tax year in which the interest period ends, or
(b) in the previous tax year.
(2) In relation to a transfer with unrealised interest of securities that form part of a deceased person’s estate, the deceased’s personal representatives are an excluded transferor or excluded transferee unless the nominal value of securities held by the deceased’s personal representatives as such exceeds £5,000 on any day—
(a) in the tax year in which the settlement day falls, or
(b) in the previous tax year.
(3) In relation to a transfer of variable rate securities that form part of a deceased person’s estate, the deceased’s personal representatives are an excluded transferor unless the nominal value of securities held by the deceased’s personal representatives as such exceeds £5,000 on any day in the relevant tax year or the previous tax year.
(4) In subsection (3) “the relevant tax year” has the meaning given by section 639(4).
(1) In relation to a transfer with accrued interest or transfer without accrued interest of securities held on a disabled person’s trusts, the trustees of the settlement are an excluded transferor or excluded transferee unless the nominal value of securities held by the trustees of the settlement as such exceeds £5,000 on any day—
(a) in the tax year in which the interest period ends, or
(b) in the previous tax year.
(2) In relation to a transfer with unrealised interest of securities held on a disabled person’s trusts, the trustees of the settlement are an excluded transferor or excluded transferee unless the nominal value of securities held by the trustees of the settlement as such exceeds £5,000 on any day—
(a) in the tax year in which the settlement day falls, or
(b) in the previous tax year.
(3) In relation to a transfer of variable rate securities held on a disabled person’s trusts, the trustees of the settlement are an excluded transferor unless the nominal value of securities held by the trustees of the settlement as such exceeds £5,000 on any day in the relevant tax year or the previous tax year.
(4) In this section—
“disabled person’s trusts” means trusts falling within paragraph 1(1) of Schedule 1 to TCGA 1992 (application of annual exempt amount), and
“the relevant tax year” has the meaning given by section 639(4).
(1) In relation to a transfer of securities by a person carrying on a trade, the person is an excluded transferor if the transfer is taken into account for income tax purposes in calculating the profits or losses of the trade.
(2) In relation to a transfer of securities at any time to a person carrying on a trade, the person is an excluded transferee if, had the transfer been made by the person at that time, it would have been taken into account for income tax purposes in calculating the profits or losses of the trade.
(1) A person is—
(a) an excluded transferor in relation to a transfer by the person, and
(b) an excluded transferee in relation to a transfer to the person,
if the person is non-UK resident throughout the tax year in which the transfer occurs and is not ordinarily UK resident during that year.
(2) In the case of a person who is carrying on a trade in the United Kingdom through a branch or agency during any part of that year (“a UK branch trader”), subsection (1) is subject to subsections (3) and (4).
(3) A UK branch trader is not an excluded transferor under subsection (1) if the securities transferred were situated in the United Kingdom and used or held for the purposes of the branch or agency at or before the time of the transfer.
(4) A UK branch trader is not an excluded transferee under subsection (1) if the securities transferred were situated in the United Kingdom at the time of the transfer and were acquired for use by or for the purposes of the branch or agency.
(5) In this section “branch or agency” has the meaning given by section 10(6) of TCGA 1992.
(6) The place where securities are situated is determined for the purposes of this section in accordance with sections 275(1) and (2)(b) and 275C of TCGA 1992.
(7) Further provision about trustees who are non-UK resident is made in section 667 (trustees' accrued income profits treated as settlement income).
(1) This section applies if—
(a) there is a transfer of securities by or to an individual in a tax year, and
(b) interest on the securities in respect of which the individual is liable to income tax for the tax year—
(i) is charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis), or
(ii) would be so charged if there were any.
(2) The individual is an excluded transferor in relation to the transfer if it is made by the individual.
(3) The individual is an excluded transferee in relation to the transfer if it is made to the individual.
(1) A person is—
(a) an excluded transferor in relation to a transfer of securities by the person, and
(b) an excluded transferee in relation to a transfer of securities to the person,
if condition A or B is met.
(2) Condition A is that if the person—
(a) became entitled to any interest on the securities, and
(b) applied it for charitable purposes only,
exemption could be granted in respect of the interest under section 532 (exemption for certain savings and investment income that belongs to a charitable trust and is applicable and applied to charitable purposes only).
(3) Condition B is that if the person—
(a) became entitled to any interest on the securities, and
(b) applied it for the purposes mentioned in section 533 (exemption for public revenue dividends that are applied only for the repair of college or church buildings etc),
exemption could be granted in respect of the interest under that section.
(4) For the transfer treated as occurring where charitable trusts over securities cease, see section 652 (securities ceasing to be held on charitable trusts).
A person is—
(a) an excluded transferor in relation to a transfer of securities by the person, and
(b) an excluded transferee in relation to a transfer of securities to the person,
if, were the person to become entitled to interest on the securities, exemption in respect of it would be allowable under section 186 of FA 2004 (exemption for income from investments held for the purposes of a registered pension scheme).
(1) This section applies if the manufactured payments conditions are met.
(2) The manufactured payments conditions are that—
(a) securities are transferred without accrued interest to a person (“the seller”),
(b) the seller makes a contract for the sale of securities of that kind (“the seller’s contract”), and
(c) any contract under which the securities are transferred to the seller, or the seller’s contract itself, is a manufactured payments contract.
(3) The seller is an excluded transferee in relation to the transfer to the seller if the nominal value of the securities subject to the seller’s contract equals or exceeds that of the securities transferred to the seller.
(4) The seller is an excluded transferor in relation to the transfer of securities under the seller’s contract.
(5) See section 663 (transfers without accrued interest to makers of manufactured payments) for cases where that nominal value is less than that of the securities transferred to the seller.
(6) In this section “manufactured payments contract” means a contract under which the seller is required to pay another person manufactured interest or a manufactured overseas dividend as mentioned in section 578 or 581.
(1) The exchange of a gilt-edged security for strips of that security is treated for the purposes of this Chapter as a transfer of the security by the person who exchanges the security.
(2) But no one is treated as the transferee.
(3) The exchange of strips of a gilt-edged security for a single gilt-edged security consolidating those strips is treated for the purposes of this Chapter as a transfer of the single security to the person who exchanges those strips.
(4) But no one is treated as the transferor.
(5) An exchange within subsection (1) or (3) is treated as a transfer without accrued interest if it is made at any time after the balance has been struck for a dividend on the security but before the day on which that dividend is payable.
(6) In any other case, such an exchange is treated as a transfer with accrued interest.
(7) If an exchange is treated as a transfer under subsection (1) or (3), any transaction forming part of the exchange is not itself a transfer for the purposes of this Chapter.
(8) In this section “strip” has the meaning given by section 444 of ITTOIA 2005.
(9) For the meaning of “gilt-edged security”, see section 1024.
(1) This section applies if—
(a) securities (“old securities”) of a particular kind are issued by way of an original issue of securities of that kind,
(b) on a later occasion securities (“new securities”) of the same kind are issued,
(c) a sum (“the extra return”) is payable in respect of the new securities by the issuer of them to reflect the fact that interest is accruing on the old securities,
(d) the issue price of the new securities includes an element (whether or not separately identified) representing payment for the extra return, and
(e) the extra return is equal to the amount of interest mentioned in subsection (2).
(2) The amount of interest referred to in subsection (1)(e) is—
(a) the amount of interest payable for the relevant period on so many old securities as there are new, or
(b) if there are more new securities than old, the amount of interest which would be so payable if there were as many old securities as new.
(3) This section does not apply if the new securities are variable rate securities.
(4) The new securities are treated as transferred with accrued interest to the person to whom they are issued on the new issue day.
(5) But no one is treated as the transferor.
(6) For the purposes of this Chapter, the settlement day for the transfer is taken to be the new issue day.
(7) See section 662 for the amount of the payment treated as made in the case of the transfer.
(8) In this section—
“the relevant period” is the period beginning with the day after—
the only or last interest payment day before the new issue day, or
if there is no interest payment day before the new issue day, the day on which the old securities are issued,
and ending with the new issue day, and
“the new issue day” is the day on which the new securities are issued.
(1) Subsection (2) applies if a person—
(a) acquires securities otherwise than as trading stock of a trade the person carries on, and
(b) appropriates the securities as trading stock for the purposes of such a trade (whether on the start of the trade or otherwise).
(2) The person is treated for the purposes of this Chapter as transferring the securities otherwise than in the course of the trade, and re-acquiring them in the course of the trade, on the day of appropriation.
(3) Subsection (4) applies if securities—
(a) form part of the trading stock of a person’s trade, and
(b) are appropriated by the person for any other purpose.
(4) The person is treated for the purposes of this Chapter as transferring the securities in the course of the trade, and re-acquiring them otherwise than in the course of the trade, on the day of appropriation.
(5) Subsection (6) applies if securities—
(a) form part of the trading stock of a person’s trade, and
(b) are retained by the person on ceasing to carry on the trade.
(6) The person is treated for the purposes of this Chapter as transferring the securities in the course of the trade, and re-acquiring them otherwise than in the course of the trade, on the day of cessation.
(7) See sections 623(2) to (4) and 624(2) to (4) for cases where securities are treated as transferred with or without accrued interest where this section applies.
(1) This section applies if a person entitled to securities otherwise than as trustee becomes trustee of them.
(2) The person is treated for the purposes of this Chapter as transferring the securities at the time the person becomes trustee of them.
(3) The transfer is treated as being made—
(a) by the person in a capacity other than trustee, and
(b) to the person and, if there are any other trustees, to the others in the capacity of trustees.
(4) See sections 623(2) to (4) and 624(2) to (4) for cases where securities are treated as transferred with or without accrued interest where this section applies.
(1) This section applies if securities held on charitable trusts cease to be subject to those trusts.
(2) The trustees are treated for the purposes of this Chapter as transferring the securities at the time when the securities cease to be so subject.
(3) The transfer is treated as being made by the trustees in their capacity as charitable trustees to themselves in another capacity.
(4) See sections 623(2) to (4) and 624(2) to (4) for cases where securities are treated as transferred with or without accrued interest where this section applies.
This Chapter does not apply to transfers of securities in circumstances such that any disposal and acquisition are disregarded for the purposes of capital gains tax as a result of section 263B(2) of TCGA 1992 (capital gains tax exemption for disposals in pursuance of stock lending arrangements).
(1) This section applies for the purposes of sections 655 to 658.
(2) There is a sale and repurchase arrangement in respect of securities if the securities are transferred under an agreement to sell them and—
(a) the transferor (“T”) or a person connected with T is required to buy back the securities by the agreement or a related agreement,
(b) T or a person connected with T is required to buy back the securities as a result of the exercise of an option acquired under the agreement or a related agreement, or
(c) T or a person connected with T exercises an option to buy back the securities which was acquired under the agreement or a related agreement.
(3) Agreements are related for the purposes of this section if they are entered into in pursuance of the same arrangement (regardless of the date on which either agreement is entered into).
(4) References in this section to buying back securities include—
(a) buying similar securities, and
(b) in the case of a person connected with T, buying the securities sold by T or similar securities.
(5) Subsection (4) applies even if the person buying the securities has not held them before.
(6) References in sections 656 and 657 to repurchase are to be read accordingly.
(7) Securities are similar for the purposes of subsection (4) if they give their holders—
(a) the same rights against the same persons as to capital and interest, and
(b) the same remedies to enforce those rights.
(8) Subsection (7) applies even if there is a difference in—
(a) the total nominal amounts of the securities,
(b) the form in which they are held, or
(c) the manner in which they can be transferred.
(1) If there is a sale and repurchase arrangement in respect of securities, this Chapter does not apply to the transfer by T or the transfer back under the arrangement.
(2) But subsection (1) does not apply if section 608 prevents section 607 (treatment of price differences under repos) from applying in relation to the arrangement.
(1) The Treasury may by regulations provide for section 655 to apply with modifications in relation to cases involving non-standard sale and repurchase arrangements.
(2) A case involves a non-standard sale and repurchase arrangement if—
(a) there is a sale and repurchase arrangement in respect of securities,
(b) T makes a sale of the securities under the agreement to sell them (“the original sale”),
(c) the securities are UK shares, UK securities or overseas securities, and
(d) any of conditions A to E is met in relation to the sale and repurchase arrangement.
(3) Condition A is that—
(a) the obligation to buy back the securities is not performed, or
(b) the option to buy them back is not exercised.
(4) Condition B is that provision is made by or under an agreement for different or additional UK shares, UK securities or overseas securities to be treated as (or as included with) representative securities.
(5) Condition C is that provision is made by or under an agreement for any UK shares, UK securities or overseas securities to be treated as not included with representative securities.
(6) Condition D is that provision is made by or under an agreement for the sale price or repurchase price to be decided or varied wholly or partly by reference to post-agreement fluctuations.
(7) Condition E is that provision is made by or under an agreement for a person to be required, in a case where there are post-agreement fluctuations, to make a payment in the period—
(a) beginning immediately after the making of the agreement for the original sale, and
(b) ending when the repurchase price becomes due.
(8) “Post-agreement fluctuations” are fluctuations in the value of —
(a) securities transferred in pursuance of the original sale, or
(b) representative securities,
which occur in the period after the making of the agreement for the original sale.
(9) “Representative securities” are UK shares, UK securities or overseas securities which, for the purposes of the repurchase, are to represent securities transferred in pursuance of the original sale.
(1) The Treasury may by regulations provide for section 655 to apply with modifications in relation to cases involving redemption arrangements.
(2) A case involves redemption arrangements if—
(a) arrangements, corresponding to those made in cases where there is a sale and repurchase arrangement in respect of securities, are made by an agreement, or one or more related agreements, in relation to securities that are to be redeemed in the period after their sale,
(b) the securities are UK shares, UK securities or overseas securities, and
(c) the arrangements are such that the seller or a person connected with the seller (instead of being required to repurchase the securities or acquiring an option to do so) is granted rights in respect of the benefits that will result from the redemption.
(1) Regulations under section 656 or 657 may make different provision for different cases.
(2) Regulations under either section may contain incidental, supplemental, consequential and transitional provision and savings.
(3) In this section and sections 656 and 657 “modifications” includes exceptions and omissions.
(4) Accordingly, a power in sections 656 and 657 to provide for a provision to apply with modifications in relation to a particular case includes power to provide for the provision not to apply in relation to that case.
(5) In sections 656 and 657 “UK shares”, “UK securities” and “overseas securities” have the same meaning as in Part 11 (see sections 566 and 567).
(1) This section applies if—
(a) the amount of the payments treated as made on a transfer of securities is to be determined under section 632(4) or (5), 633(5) or 662(4) (cases where interest is not accounted for separately),
(b) there has been a failure to pay interest due on the securities, and
(c) as a result of the failure, on the interest payment day which is or follows the settlement day the value of the right to receive the interest payable on the securities is less than the interest payable.
(2) The calculation under section 632(4) or (5), 633(5) or 662(4) is to be made by reference to that value instead of the interest.
(1) This section applies if—
(a) securities are transferred with unrealised interest,
(b) there has been a failure to pay interest due on the securities transferred, and
(c) as a result of the failure, on the day of the transfer the value of the right to receive the unrealised interest (“the unrealised interest value”) is less than the unrealised interest.
(2) The amount of the payment treated as made to the transferor under section 634(2) is taken to be the unrealised interest value instead of the amount of the unrealised interest.
(3) The amount of accrued income profits under section 631(1) is taken to be the unrealised interest value instead of the amount of the unrealised interest.
(4) Subsections (2) and (3) are subject to section 661 (successive transfers with unrealised interest in default).
(5) For the purposes of this section and section 661, a person is treated as transferring securities of a particular kind which the person acquired later before securities of that kind acquired earlier.
(6) See also section 681 (exemption for unrealised interest received by transferee after transfer).
(1) The amount taken as the unrealised interest value for the purposes of section 660(2) or (3) is reduced if the person (“T”) who makes the transfer referred to in section 660(1) also acquired the securities with the right to receive unrealised interest.
(2) The amount of the reduction depends on whether subsection (3) applies.
(3) This subsection applies if—
(a) T has received, as transferee, some or all of that unrealised interest, and
(b) T is liable for income tax on it for the tax year in which it was received.
(4) If subsection (3) applies, the reduction is equal to the value on the day of the transfer to T of the right to receive the unrealised interest (“the earlier value”) less the total so received.
(5) If subsection (3) does not apply, the reduction is equal to the earlier value.
(6) But if the reduction under subsection (4) or (5) exceeds the amount mentioned in subsection (1), that amount is treated as reduced to nil.
Income Tax Act 2007