Income Tax Bill

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
330

Exception where there is a transfer to a legatee
636
Exception where there is a transfer to a legatee
(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
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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
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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.
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(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.
Relief for losses
637
Accrued income losses treated as payments in next interest period
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(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
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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).
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Excluded transferors and transferees
638
Excluded persons: disregard of certain payments and transfers
(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
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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.

Income Tax Bill
Part 12 — Accrued income profits
Chapter 2 — Accrued income profits and losses
331

(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
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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),
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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).
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(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).
639
Small holdings: individuals
(1)
In relation to a transfer with accrued interest or transfer without accrued
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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.
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(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.
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(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
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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
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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.

Income Tax Bill
Part 12 — Accrued income profits
Chapter 2 — Accrued income profits and losses
332

640
Small holdings: personal representatives
(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
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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
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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.
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(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.
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(4)
In subsection (3) “the relevant tax year” has the meaning given by section
639(4).
641
Small holdings: trustees of a disabled person’s trusts
(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
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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.
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(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
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(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.
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(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).

Income Tax Bill
Part 12 — Accrued income profits
Chapter 2 — Accrued income profits and losses
333

642
Traders
(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,
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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.
643
Non-residents
(1)
A person is—
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(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
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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.
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(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
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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).
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644
Individuals to whom the remittance basis applies
(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—
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(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.
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(3)
The individual is an excluded transferee in relation to the transfer if it is made
to the individual.