SolvedSAIM4130 | Accrued Income Scheme: calculating accrued income profits and losses: examples
From HM Revenue & Customs · Savings and Investment Manual
Taxation of accrued income profits and losses: examples
Example 1
Antoinette has £100,000 Treasury Stock 7¾ % 2006, which has interest dates of 8 March and 8 September. She makes the following transactions in the stock.
| Transaction | Profit/loss |
|---|---|
| 19 March 2006 sells £100,000 | £233 |
| 21 March 2006 buys £50,000 | (£138) |
| 12 May 2006 sells £50,000 | £690 |
| Total | £785 |
The aggregate profit is £785, taxable for 2006-07, the tax year in which the interest period ended, even though two of the transactions occur in 2005-06.
Example 2
Jean made the following transactions in securities between 19 March 2005 and 5 April 2006.
19 March 2005: bought £100,000 Treasury Stock 7½% 2006 (interest payment dates 7 June and 7 December)
26 May 2005: bought £50,000 Treasury Stock 7½% 2006 ex div
15 September 2005:sold £20,000 Treasury Stock 7½% 2006
22 September 2005: bought £50,000 Treasury Stock 4½ % 2007 (interest payment dates 7 March and 7 September)
The profits and losses arising on these transactions are:
| Transaction date | Interest period | Profit/loss |
|---|---|---|
| 19 March 2005 | 08/12/04 - 07/06/05 | (£2,095) |
| 26 May 2005 | 08/12/04 - 07/06/05 | £123 |
| 15 September 2005 | 08/06/04 - 07/12/05 | £410 |
| 22 September 2005 | 08/09/04 - 07/03/05 | (£92) |
The profits and losses for 2005-06 are:
Loss of £1,972 (2,095 minus £123) against interest of £5625 (£150,000 x 7.5% x 1/2) received on Treasury Stock 7½% 2006 on 7 June 2005
Profit of £410 (Treasury Stock 7½% 2006, interest period 8 June 2005 - 7 December 2005)
Loss of £92 against interest of 31125 received on Treasury Stock 4½ % 2007 on 7 March 2006.
Example 3
See Example 3 in SAIM4160. Joe Smith sells £4,000 unsecured loan stock in Stuffed Dodos Ltd to his Aunt Matilda on 19 August 2015. Interest is payable on 5 April 2015 and 18 April 2016. Neither Joe nor Matilda had any other transactions in securities.
The settlement day falls within the interest period 5 April 2015 to 4 April 2016. Joe is taxable on £79 for 2015-16 in respect of this interest period.
Matilda's loss of £79 is carried forward to 2016- 17 to be set against the interest receivable for the period 5 April 2015 to 18 April 2016 (ITA07/S637 - see SAIM4120).