Income Tax (Trading and Other Income) Act 2005

Chapter 6 U.K. Income from FOTRA securities

713 Introduction: securities free of tax to residents abroad (“FOTRA securities”) U.K.

(1) This Chapter provides for exemptions from income tax in respect of FOTRA securities.

(2) In this Chapter “FOTRA security” means—

(a) a security issued with a condition about exemption from taxation authorised by section 22 of F(No.2)A 1931,

(b) a gilt-edged security which was issued before 6th April 1998 and without any such condition (other than 3½% War Loan 1952 Or After), or

(c) 3½% War Loan 1952 Or After.

(3) In this Chapter “the exemption condition” has the meaning given by subsections (4) to (6), according to the kind of FOTRA security involved.

(4) In relation to a security within subsection (2)(a), it means the condition authorised by section 22 of F(No.2)A 1931.

(5) In relation to a security within subsection (2)(b), it means a condition with which 7.25% Treasury Stock 2007 was first issued, being a condition treated by section 161(1) of FA 1998 (non-FOTRA securities)—

(a) as a condition with which the security within subsection (2)(b) was issued, and

(b) as a condition authorised in relation to its issue by section 22 of F(No.2)A 1931.

(6) In relation to 3½% War Loan 1952 Or After, it means a condition of its issue authorised by section 47 of F(No.2)A 1915.

714 Exemption of profits from FOTRA securities U.K.

(1) No liability to income tax arises in respect of profits from a FOTRA security if conditions A and B are met.

(2) Subsection (1) is subject to subsection (5).

(3) Condition A is that the profits are stated in the exemption condition to be exempt from income tax.

(4) Condition B is that any requirements for obtaining the exemption imposed by the security's conditions of issue are met.

(5) Whatever the exemption condition provides, amounts charged under the provisions specified in subsection (6) are not exempted by subsection (1).

(6) The provisions are—

• Chapter 5 of Part 5 (settlements: amounts treated as income of settlor) so far as it applies to income within section 619(1)(a) or (b), and

• Chapter 3 of Part 17 of ICTA (anti-avoidance provisions: transfer of assets abroad).

(7) This section does not affect the need to claim repayment of tax within the time limit applicable for a claim.

715 Interest from FOTRA securities held on trust U.K.

(1) This section applies if—

(a) a FOTRA security is held on trust, and

(b) apart from this section, interest payable on the security would not be exempt from income tax under section 714 because of the security not being in the beneficial ownership of a person not ordinarily UK resident.

(2) For the purposes of determining whether the interest is exempt under section 714 it is to be assumed that the security is in the beneficial ownership of a person not ordinarily UK resident if none of the beneficiaries of the trust is ordinarily UK resident at the time when the interest arises.

(3) In subsection (2) “beneficiaries of the trust” includes any person known to the trustees as a person—

(a) who is, or will or may become, entitled under the terms of the trust to receive income under the trust, or

(b) to whom or for whose benefit such income may be paid or applied.

(4) In subsection (3) “income under the trust” includes any property held on the terms of the trust and falling to be treated as capital so far as it is or represents amounts received by the trustees as income.

716 Restriction on deductions etc. relating to FOTRA securities U.K.

(1) A person who meets conditions A and B may not bring into account for income tax purposes—

(a) any amount relating to changes in the value of a FOTRA security, or

(b) expenses related to holding it or to any transaction concerning it.

(2) Condition A is that the person is the beneficial owner of the security.

(3) Condition B is that the person is a person who would be exempt from tax on the security under this Chapter.