SAIM4270 | Accrued Income Scheme: special types of transfer: transfers to and from excluded persons

Transfers to and from excluded persons

There are special rules for transfers by persons who transfer securities to or from themselves in different capacities. These are traders, trustees, and charities, who are excluded from being transferors or transferees under the Accrued Income Scheme (SAIM4220). In such cases an AIS charge arises on the person making the transfer in their non-exempt capacity.

Appropriations to and from trading stock

ITA07/S650 modifies the normal rules on transfers where securities which were acquired by a person otherwise than as trading stock are appropriated for use as trading stock in a trade. The person is to be treated as transferring and reacquiring the securities otherwise than in the course of the trade on the day the appropriation is made. The trader’s deemed re-acquisition of the securities will be outside the scope of the AIS by virtue of ITA07/S642.

Similarly, where securities which form part of the trading stock of a financial trade are appropriated by the trader for other purposes or are retained by him when the trade ceases, he is treated as if he had the securities transferred to him, otherwise than in the course of the trade, on the day they cease to be held as trading stock. Such transfers will normally be ‘with accrued interest’ unless exceptionally the securities were acquired on the dividend payable next after the day on which appropriation occurs.

Owner becoming entitled to securities as trustee

ITA07/S651 applies where the owner of securities settles the securities on trust and is or becomes trustee of them. A transfer of the securities is treated as made by the owner of the securities.

Securities ceasing to be held on charitable trusts

ITA07/S652 deals with the cases where securities are held on trusts that cease to be charitable.

In such cases the trustees are treated as transferring the securities (in their charitable capacity) to themselves (in their non-charitable capacity). The effect is that accrued income is exempt up to the date of the transfer from the charitable trusts.