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.