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HMRC internal manual

Accrued Income Scheme: calculating accrued income profits and losses: examples

Taxation of accrued income profits and losses: examples

Example 1

Antoinette has £100,000 Treasury Stock 7¾ % 2006, which has interest dates of 8 March and 8 September. She makes the following transactions in the stock.

 ## Taxation of accrued income profits and losses: examples

Example 1

 Antoinette has £100,000 Treasury Stock 7¾ % 2006, which has interest dates of 8 March and 8 September. She makes the following transactions in the stock. Profit/loss 19 March 2006 sells £100,000 £2,107 21 March 2006 buys £50,000 (£1,361) 12 May 2006 sells £50,000 (£131) £615

The aggregate profit is £615, taxable for 2006-07, the tax year in which the interest period ended, even though two of the transactions occur in 2005-06.

Example 2

Jean made the following transactions in securities between 28 February 2005 and 5 April 2006.

 19 March 2005 bought £100,000 Treasury Stock 7½% 2006 (interest payment dates 7 June and 7 December) 26 May 2005 bought £50,000 Treasury Stock 7½% 2006 ex div 15 September 2005 sold £20,000 Treasury Stock 7½% 2006 22 September 2005 bought £50,000 Treasury Stock 4½ % 2007 (interest payment dates 7 March and 7 September)

The profits and losses arising on these transactions are:

 Transaction date Interest period Profit/loss 19 March 2005 08/12/04 - 07/06/05 (£1,395) 26 May 2005 08/12/04 - 07/06/05 £82 15 September 2005 08/06/04 - 07/12/05 £271 22 September 2005 08/09/04 - 07/03/05 (£778)

The profits and losses for 2005-06 are:

• Loss of £1,313 (£1,395 minus £82) against interest of £3,750 (£100,000 x 7½% x ½) received on Treasury Stock 7½% 2006 on 7 June 2005.
• Profit of £271 (Treasury Stock 7½% 2006, interest period 8 June 2005 - 7 December 2005)
• Loss of £778 against interest of £2,250 received on Treasury Stock 4½ % 2007 on 7 March 2006.

Example 3

See Example 3 in SAIM4160. Joe Smith sells £4,000 unsecured loan stock in Stuffed Dodos Ltd to his Aunt Matilda on 19 August 2015. Interest is payable on 5 April 2015 and 18 April 2016. Neither Joe nor Matilda had any other transactions in securities.

The settlement day falls within the interest period 5 April 2015 to 4 April 2016. Joe is taxable on £79 for 2015-16 in respect of this interest period.

Matilda’s loss of £79 is carried forward to 2016- 17 to be set against the interest receivable for the period 5 April 2015 to 18 April 2016 (ITA07/S637 - see SAIM4120).