Part 12Accrued income profits
Chapter 3Exemptions relating to interest on securities
681Unrealised interest received by transferee after transfer
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.