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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
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Other tax rules on corporate finance: exemptions from loan relationships: FOTRA securities

Securities free of tax to residents abroad

Certain UK Government securities have been issued subject to conditions that any profits (interest and profit on sale) are exempt from tax so long as they are beneficially held by a person not resident in the UK (‘free of tax to residents abroad’ - FOTRA), or the securities are held in trust and a non-ordinarily resident beneficiary is entitled to the interest. The exemption from income tax is set out in CTA09/S1203 and CTA09/S1204.

The FOTRA securities listed in CTA09/S1204 are securities issued subject to the exemption in F(No.2)A 1931, gilt-edged securities issued before 6 April 1998, and 3½% War Loan 1952. Originally, FOTRA securities were issued under Treasury powers in F(No 2)A 1931, FA 1940, and FA96/S154(1). Under FA98/S161 any gilt issued before 6 April 1998 is treated as if it were a FOTRA security, and since then all gilts have been treated as issued subject to FOTRA conditions.

‘Gilt-edged security’ takes its meaning from Schedule 9 to TCGA92.

The corresponding rule for income tax is at ITA07/S714.