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HMRC internal manual

Capital Gains Manual

Securities: Gilt-edged securities

Gilt-edged securities or gilts are UK Government loan stock. Since 2 July 1986 all disposals of gilt-edged securities have been exempt from Capital Gains Tax, TCGA92/S115 (1)(a).

The formal definition of gilt-edged securities is in TCGA92/SCH9/PARA1. They are

  • securities listed in Part II of Schedule 9. This includes all securities which were listed up to April 1992
  • securities which are specified by Treasury Order. These are securities which have been issued since April 1992.

The list of gilt-edged securities in TCGA92/SCH9 included in the annual editions of the Taxes Acts may not identify all gilt-edged securities.

There is a list of gilt-edged securities on the HMRC Internet site. This includes all those included in the list at Part ll of TCGA92/SCH9 and also those specified by Treasury Orders issued since that list was last updated.

The debts included in TCGA92/SCH9 and subsequent Treasury Orders are described as either `stock’ or `loan’. Debts with `loan’ in the title may be held in either bearer form or registered form. You should note that where the debt is held in registered form, the tax vouchers issued by the Treasury notifying holders of interest and tax deducted will be headed `stock’. For example vouchers in respect of 8 3/4% Treasury Loan 1997 held in registered form will be headed `8 3/4% Treasury Stock 1997’. This does not affect the correct title for the debt, or its capital gains treatment.

Options and futures

The exemption from Capital Gains Tax extends to options and other contracts to acquire or dispose of gilt-edged securities, TCGA92/S115 (1)(b).

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Gilt strips

Gilt strips are instruments created by the removal - or `stripping’ - from the underlying gilt-edged security of the rights to payments of interest at separate future dates during the life of the gilt. These rights, or `strips’, can be traded separately from the underlying right to capital repayment on the gilt itself.

FA96 inserted a new TCGA92/SCH9/PARA1A. This has the effect that a gilt strip is also treated as a gilt-edged security for the purposes of TCGA92. So the exemption from capital gains provided by TCGA92/S115 (1)(a), see CG54901, will also apply to gilt strips.

Gilt strips held by individuals and other non-corporates are treated as deeply discounted securities, and profits or losses are taken into the income regime, see SAIM3130.