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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

Remittance Basis: Identifying Remittances: Specific Topics: Accrued Income Scheme

Where a security is sold with accrued income and the proceeds paid into an account, the part of the proceeds representing accrued income will be taxable as income and subject to income tax under the Accrued Income Scheme (AIS). Refer to the Savings and Investment Manual SAIM4000+ for information about the AIS.

Where an individual is chargeable on the remittance basis, accrued income profits arising from on transfers of a ‘foreign security’ are treated as relevant foreign income - refer to RDRM31140. Securities are “foreign” where income (in practice, interest) from them would be relevant foreign income. This will include, for example, a security issued in registered form by a non-UK company, which maintains the register of note-holders outside the UK.

For consistency of treatment between the AIS and the remittance basis regime, HMRC will follow the tax treatment delivered by the AIS and accept that an ’income amount’ can be transferred to a separate ‘income account’ immediately upon transfer, that is, the proceeds are ‘split’ into two separate accounts immediately upon receipt into the individual’s account. This ‘income’ could then be identified and taxed as such, without creating a mixed fund refer to RDRM35200.

To the extent that the remainder of the proceeds consist of capital or UK or non-taxable income (as opposed to, say, untaxed foreign income or gains) originally used in the purchase of the security (refer to RDRM35030) the remainder of the proceeds could therefore be separately identified and remitted as such.

Refer to SAIM4380+ for more information on the treatment of remittance basis users with accrued income profits.