Part 12U.K.Accrued income profits

Chapter 3U.K.Exemptions relating to interest on securities

681Unrealised interest received by transferee after transferU.K.

(1)This section applies if—

(a)securities are transferred with unrealised interest,

(b)the transferee is not an excluded transferee in relation to the transfer for the purposes of Chapter 2 (see sections 638 to 647),

(c)the transferee receives some or all of the unrealised interest, and

(d)apart from this section, the transferee would be liable to income tax on the unrealised interest.

(2)No liability to income tax arises in respect of the unrealised interest received by the transferee, unless conditions A and B are met.

(3)Condition A is that section 660 (transfers with unrealised interest: interest in default) applies on the transfer.

(4)Condition B is that the unrealised interest received by the transferee exceeds the residual value of the interest.

(5)In this section “the residual value of the interest” means—

(a)the value on the day of the transfer of the right to receive the unrealised interest, less

(b)the total amount of any of that unrealised interest received previously by the transferee.

(6)If conditions A and B are met, no liability to income tax arises in respect of the unrealised interest to the extent that it does not exceed the residual value of the interest.

(7)Section 665 (foreign currency securities: unrealised interest payable in foreign currency) applies for the purposes of this section as it applies for the purposes of sections 660 and 661.