House of Commons portcullis
House of Commons
Session 2006 - 07
Internet Publications
Other Bills before Parliament

Income Tax Bill


Income Tax Bill
Part 12 — Accrued income profits
Chapter 2 — Accrued income profits and losses

321

 

617     

Income charged

(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

5

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.

10

(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).

15

(6)   

For the meaning of “interest period” and “the settlement day”, see sections 673

and 674 respectively.

618     

Person liable

(1)   

The person liable for any tax charged under this Chapter is the person treated

as making the accrued income profits.

20

(2)   

But see section 666 (under which nominees and trustees may be disregarded).

Securities to which Chapter applies

619     

Meaning of “securities” and when securities are of the same kind

(1)   

In this Chapter “securities” includes—

(a)   

any loan stock or similar security other than an excluded security, and

25

(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

30

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

35

(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,

40

(c)   

uncertificated eligible debt security units as defined in section 986,

 
 

Income Tax Bill
Part 12 — Accrued income profits
Chapter 2 — Accrued income profits and losses

322

 

(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

5

(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).

10

(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

15

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.

Transfers to which Chapter applies

20

620     

Transactions which are transfers: general

(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),

25

(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),

30

(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

35

(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

40

(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.

 
 

Income Tax Bill
Part 12 — Accrued income profits
Chapter 2 — Accrued income profits and losses

323

 

(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),

5

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.

621     

Transferors and transferees

10

(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

15

(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.

20

(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),

25

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).

30

(5)   

See also sections 638 to 647 (excluded transferors and transferees).

622     

Application of Chapter to different kinds of transfer

(1)   

Different rules apply under this Chapter for the different kinds of transfer

specified in subsection (2).

(2)   

The transfers are—

35

(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

40

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.

 
 

Income Tax Bill
Part 12 — Accrued income profits
Chapter 2 — Accrued income profits and losses

324

 

623     

Transfers with accrued interest

(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

5

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).

10

(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).

15

(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—

20

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).

624     

Transfers without accrued interest

25

(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).

30

(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).

35

(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

40

accrued interest).

 
 

 
previous section contents continue
 
House of Commons home page Houses of Parliament home page House of Lords home page search page enquiries

© Parliamentary copyright 2007
Revised 5 February 2007