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
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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
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(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.
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(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.
662
New securities issued with extra return: special rules about payments
(1)
In the case of a transfer treated as made under section 649 (new securities
issued with extra return), the amount of the payment treated as made under
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section 632(1) (payment on transfer with accrued interest) is not determined
under section 632(2) to (5).
(2)
Instead, that amount depends on whether under the issue arrangements the
person to whom the new securities are issued accounts to the issuer
separately—
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(a)
for the extra return, and
(b)
for the rest of the issue price.
(3)
If the person does account for them separately, the amount of the payment is
the amount of the extra return separately accounted for.
(4)
If the person does not account for them separately, the amount of the payment
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is an amount equal to—

where—
I is the interest payable on the new securities on the first interest payment
day after the new issue day (“the payment day”),
A is the number of days in the relevant period, and
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B is the number of days in the period beginning with the first day of the
relevant period and ending with the payment day.
(5)
Subsection (4) is subject to section 659 (transfers with or without accrued
interest: interest in default).
(6)
In this section “the extra return”, “the new issue day”, “new securities” and “the
35
relevant period” have the same meaning as in section 649.
663
Transfers without accrued interest to makers of manufactured payments
(1)
This section applies if—

Income Tax Bill
Part 12 — Accrued income profits
Chapter 2 — Accrued income profits and losses
342

(a)
the manufactured payments conditions are met (see section 647(2)),
and
(b)
the nominal value of the securities subject to the seller’s contract is less
than that of the securities transferred to the seller.
(2)
The amount of the payment treated as made to the seller under section 633 on
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the transfer of the securities to the seller is reduced.
(3)
The reduction is by so much of that amount as is attributable to securities (“the
matched securities”) of a nominal value equal to that of the securities subject to
the seller’s contract.
(4)
If there is more than one transfer of securities to the seller, those transferred to
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the seller earlier are treated as the matched securities before those transferred
later.
(5)
In this section “the seller” and “the seller’s contract” have the same meaning as
in section 647.
(6)
For cases where subsection (1)(b) does not apply, see section 647(3) (under
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which the seller is treated as an excluded transferee).
664
Foreign currency securities: sterling equivalent of payments on transfers
(1)
The sterling equivalent of the amount of the payment treated as made on a
transfer of securities is determined in accordance with this section if interest on
the securities is payable in a currency other than sterling (“a foreign currency”).
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(2)
If the payment is determined under section 632(3), 633(3) or 662(3) (transfers
under an arrangement by which interest is accounted for separately), the
amount of the payment depends on whether the sterling equivalent of the
interest separately accounted for is shown in an agreement for transfer.
(3)
If the sterling equivalent is so shown, the amount of the payment is taken to be
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that sterling equivalent.
(4)
If the sterling equivalent is not so shown, the amount is taken to be the sterling
equivalent on the settlement day of the interest separately accounted for.
(5)
If the amount of the payment treated as made is determined under any other
provision (except section 660 (transfers with unrealised interest: interest in
30
default)), the amount is taken to be its sterling equivalent on the settlement
day.
(6)
For the purposes of this section, the sterling equivalent of an amount or value
in a foreign currency is to be calculated by reference to the London closing rate
of exchange for the day concerned.
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665
Foreign currency securities: unrealised interest payable in foreign currency
(1)
This section applies if unrealised interest is payable in a currency other than
sterling (“a foreign currency”).
(2)
For the purposes of section 631(1) (amount of accrued income profits where
settlement day outside interest period) the amount of the unrealised interest is
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taken to be its sterling equivalent on the settlement day.
(3)
For the purposes of sections 660 (transfers with unrealised interest: interest in
default) and 661 (successive transfers with unrealised interest in default), the

Income Tax Bill
Part 12 — Accrued income profits
Chapter 2 — Accrued income profits and losses
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value on any day of the right to receive unrealised interest is the sterling
equivalent on that day of that value in the foreign currency.
(4)
For the purposes of those sections unrealised interest received in a foreign
currency is taken to be the sterling equivalent on the day of receipt of the
amount received.
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(5)
For the purposes of this section, the sterling equivalent of an amount or value
in a foreign currency is to be calculated by reference to the London closing rate
of exchange for the day concerned.
Nominees and trustees
666
Certain transfers by or to nominees or trustees treated as made by or to others
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(1)
Transfers of securities by or to a person as nominee for another person (“A”)
are treated for the purposes of this Chapter as transfers by or to A.
(2)
Transfers of securities by or to a person (“T”) as trustee for another person (“B”)
are treated for the purposes of this Chapter as transfers by or to B if B is
absolutely entitled as against T.
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(3)
For the purposes of subsection (2) where T is the transferor, B is absolutely
entitled as against T if immediately before the transfer B has the exclusive right
to direct how the securities are to be dealt with.
(4)
For the purposes of subsection (2) where T is the transferee, B is absolutely
entitled as against T if immediately after the transfer B has that exclusive right.
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(5)
For the purposes of subsections (3) and (4), a right to direct how securities are
to be dealt with is treated as an exclusive right despite being subject to
satisfying any outstanding charge, lien or other right of the trustee to resort to
the securities for payment of duty, taxes, costs or other outgoings.
(6)
Subsection (1) applies to a transfer of securities by or to a person as nominee
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for two or more persons as it applies to a transfer of securities by or to a person
as nominee for one person, taking the references to A as references to the two
or more persons.
(7)
This section applies to a transfer of securities by or to a person as trustee for
two or more persons as it applies to a transfer of securities as trustee for one
30
person, taking—
(a)
the references to B as references to the two or more persons, and
(b)
the references to B being absolutely entitled as references to the two or
more persons being jointly absolutely entitled.
(8)
The fact that a person is an infant or otherwise lacks legal capacity is to be
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disregarded in determining for the purposes of this section whether the person
is absolutely entitled as against T.
667
Trustees’ accrued income profits treated as settlement income
(1)
If the trustees of a settlement are treated as making qualifying accrued income
profits, those profits are to be taken to be income arising under the settlement
40
for the purposes of Chapter 5 of Part 5 of ITTOIA 2005 (settlements: amounts
treated as income of settlor).

Income Tax Bill
Part 12 — Accrued income profits
Chapter 2 — Accrued income profits and losses
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(2)
Subsection (3) applies if the trustees of a settlement—
(a)
are non-UK resident or domiciled outside the United Kingdom
throughout a tax year in which an interest period or part of an interest
period falls, and
(b)
would have been treated as making an amount or an additional amount
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of qualifying accrued income profits in the interest period if the trustees
had been UK resident or domiciled in the United Kingdom during a
part of each such tax year.
(3)
The amount or additional amount of qualifying accrued income profits that the
trustees would have been treated as making is to be taken to be income arising
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under the settlement for the purposes of Chapter 5 of Part 5 of ITTOIA 2005.
(4)
In this section—
(a)
“qualifying accrued income profits” means accrued income profits
which are treated as made—
(i)
under section 628(5), or
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(ii)
under section 630(2) in respect of a transfer of variable rate
securities, and
(b)
in any case where there are no trustees of a settlement, references to
such trustees are to any persons entitled to securities comprised in the
settlement.
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(5)
In the case of qualifying accrued income profits within subsection (4)(a)(ii)—
(a)
the reference in subsection (2)(a) to an interest period is to the period—
(i)
beginning with the day after the last day of the only or last
interest period of the securities, and
(ii)
ending with the settlement day, and
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(b)
the reference in subsection (2)(b) to making qualifying accrued income
profits in the interest period is to be read as making them in the tax year
in which settlement day falls.
Relief where transfer proceeds unremittable
668
Relief for unremittable transfer proceeds: general
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(1)
This section applies if—
(a)
a person is liable for income tax on accrued income profits,
(b)
the profits are calculated by reference to payments treated as made to
the person in an interest period,
(c)
the payments are so treated as a result of the person making transfers
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of foreign securities of a particular kind, and
(d)
the proceeds of the transfers are unremittable in the tax year.
(2)
If the person makes a claim for relief under this section—
(a)
the profits are reduced by the amount of the payments treated as made
to the person, or
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(b)
if that amount exceeds the profits, the profits are reduced to nil.
(3)
But see section 670 (withdrawal of relief).
(4)
In this section and section 669 “foreign securities” means securities which are
situated outside the United Kingdom.

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Part 12 — Accrued income profits
Chapter 2 — Accrued income profits and losses
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(5)
For the purposes of this section and sections 669 and 670, proceeds of transfers
of foreign securities are unremittable in relation to a person if the person is
prevented from transferring them to the United Kingdom because of—
(a)
the laws of the territory where the securities are situated,
(b)
executive action of its government, or
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(c)
the impossibility of obtaining there currency that could be transferred
to the United Kingdom.
(6)
For the purposes of this section the place where securities are situated is to be
determined in accordance with sections 275(1) and (2)(b) and 275C of TCGA
1992.
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(7)
Any claim under this section must be made on or before the fifth anniversary
of the normal self-assessment filing date for the tax year for which the profits
would be chargeable to tax if no claim were made.
(8)
A person’s personal representatives may make any claim under this section
which the person might have made.
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669
Relief for unremittable transfer proceeds: section 630 profits
(1)
This section applies if—
(a)
a person is liable for income tax on accrued income profits within
section 630(2) (making accrued income profits: settlement day outside
interest period),
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(b)
the person is so liable as a result of making transfers of foreign
securities of a particular kind, and
(c)
the proceeds of the transfers are unremittable in the tax year.
(2)
If the person makes a claim for relief under this section the profits are reduced
to nil.
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(3)
But see section 670 (withdrawal of relief).
(4)
Any claim under this section must be made on or before the fifth anniversary
of the normal self-assessment filing date for the tax year for which the profits
would be chargeable to tax if no claim were made.
(5)
A person’s personal representatives may make any claim under this section
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which the person might have made.
670
Withdrawal of relief
(1)
This section applies if—
(a)
a claim under section 668(2) or 669(2) has been made in relation to
profits, and
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(b)
the proceeds of the transfers cease to be unremittable.
(2)
The claimant is treated as making accrued income profits of an amount equal
to the reduction under that section.
(3)
If the claimant has died, the claimant’s personal representatives are so treated.