CFM37170 - Loan relationships: special types of security: gilt-edged securities: restrictions on deductions

FOTRA securities and 3½% War Loan 1952

FOTRA securities

No liability to corporation tax arises in respect of profits from securities that are free of tax to residents abroad (‘FOTRA’ securities) or a loan relationship represented by such securities, which meet certain conditions for exemption. These are set out in CTA09/S1279 and S1280.

FOTRA securities are

  • those issued with a condition about exemption authorised under F(No.2)A 1931,
  • gilt-edged securities without such a condition issued before 6th April 1998 (other than 3½% War Loan 1952 Or After), and
  • 3½% War Loan 1952 Or After.

If a company qualifies for the exemption on such a security, CTA09/S404 denies it deductions relating to the changes in value of the security and debits relating to holding the security or any transaction concerning it.

3½% War Loan 1952

A non-UK resident company which carries on a banking, insurance or securities-dealing business, and which is exempt under CTA09/S1279 on profits from 3½% War Loan Or After, is denied a deduction for a proportion of interest borrowed for business purposes. CTA09/S405 sets out the formula for calculating the ineligible amount.