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HMRC internal manual

Savings and Investment Manual

Savings and investment income: non-residents: FOTRA securities

Free Of Tax to Residents Abroad (FOTRA) securities

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). The exemption from income tax is set out in Chapter 6 of Part 6 ITTOIA05 (sections 713 to 716).

Profits are also exempt from tax where the FOTRA security is held in trust and

  • all the beneficiaries are not ordinarily resident in the UK (where the securities were acquired before 6 April 2013), or
  • all the beneficiaries are not resident in the UK (where securities were acquired after 5 April 2013)

TSEM3185 (SAIM20000) provides further guidance for trustees in receipt of FOTRA income.

The FOTRA securities listed in ITTOIA05/S713 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.

In certain circumstances the exemption can apply where a dealer holds a security and the interest or profit on sale is taxable as trading income.

Foreign currency securities owned by non-UK residents

ITTOIA05/S755 exempt interest on certain foreign currency securities issued by local authorities or statutory corporations, and beneficially owned by a non-resident.