Section 617: Income charged
1801.This section provides that the full amount of accrued income profits is charged to tax. It is based on sections 714(2), (2A), 716(2), (3) and (3A), 717(10) and (11) and 723(4) of ICTA.
1802.Accrued income profits are normally computed by reference to transfers of securities of the same kind where the transfer is settled in the same interest period. Subsection (2) provides that the profits are treated as made in the tax year in which that interest period ends.
1803.Subsection (3) deals with unusual cases where the settlement day for the transfer falls outside an interest period. The last interest period of securities ends with the last interest payment day. So, if securities pay their last interest before their redemption date, their last interest period will end before the securities’ redemption date. But, if a transfer occurs after the last interest payment, the settlement day for the transfer will not fall in an interest period.
1804.In such cases, subsection (3) treats the profits as made in the tax year in which the settlement day falls. It applies if:
securities are transferred with unrealised interest (see section 625 for the meaning of “unrealised interest”); or
variable rate securities are transferred (see section 627 for the meaning of “variable rate securities”).
1805.See Change 101 in Annex 1, by virtue of which all transfers of variable rate securities (and not just a transfer on redemption), where the settlement day for the transfer is outside an interest period, are treated alike for the purposes of subsection (3) and all other provisions applicable to such transfers.
1806.Subsection (4) determines the tax year in which accrued income profits are treated as made if the proceeds of the transfer could not be remitted to the United Kingdom (and so relief from the accrued income scheme was claimed under section 668 or 669) but can be remitted subsequently (which triggers a charge by virtue of section 670).
