Income Tax Bill

House of Commons

Session 2006 - 07
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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
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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.
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(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).
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(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.
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(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
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(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
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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
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(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,
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(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
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(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).
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(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
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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
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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),
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(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),
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(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
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(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
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(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),
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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
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(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
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(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.
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(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),
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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).
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(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—
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(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
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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
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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).
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(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).
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(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—
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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
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(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).
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(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).
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(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
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accrued interest).