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HMRC internal manual

Savings and Investment Manual

Accrued Income Scheme: special types of transfer: gilts strips

Gilt strips

Gilt strips come within the rules on deeply discounted securities (see SAIM3000 onwards and SAIM3130 for more on gilt strips). The AIS rules only apply when there is an exchange of a gilt for gilt strips, or vice versa.

ITA07/S648 deems there to have been a transfer for accrued income scheme purposes whenever a gilt (Government stock) is exchanged for strips of that gilt, or a reconstitution, that is an exchange of gilt strips for the corresponding gilt.

In the first case there is an accrued income scheme transfer by the person who exchanges the security for the strips, but no one is treated as the transferee. In the second case, there is a transfer to the person who exchanges the strips for the security, but no one is treated as the transferor.

The AIS thus taxes the accrued interest up to the date of stripping or reconstitution of the securities, which would be acquired at market value. The strips themselves are not within the accrued income scheme and any disposals of strips are dealt with under the rules relating to deeply discounted securities.