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HMRC internal manual

Inheritance Tax Manual

Foreign property: specific British Government Securities: exclusion of interest on exempt securities

The exclusion for exempt securities can also apply to certain payments of interest on the securities. Payments that qualify for the exclusion are:

  • warrants or coupons for interest already received but not encashed at the date of the relevant chargeable event
  • apportionment of interest due up to, but receivable after, the date of the chargeable event
  • in the case of a trust, any interest payments already encashed but held, at the date of the chargeable event, by the trustees, before distribution in the administration of the trust. These payments will be excluded even if no separate money can be identified as relating directly to interest on exempt securities.

The exclusion for interest does not apply to any warrants or coupons already encashed, or payments of interest already received by the beneficiary in their lifetime, in connection with a chargeable event that happened after they were encashed or received. This is the case whether the beneficiary is the absolute owner of the exempt securities or a beneficiary under a trust.