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HMRC internal manual

Savings and Investment Manual

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HM Revenue & Customs
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Accrued Income Scheme: remittance basis: examples

Examples of the application of the remittance basis to the AIS

The application of the remittance basis to the AIS is not without complication. The following examples set out line HMRC takes in particular circumstances.

Example 1

Ann holds foreign securities ‘of the same kind’ X and Y which are disposed of in an interest period. They realise the following A and B amounts. (SAIM4110 explains the calculation of accrued income profits and losses.)

Security Proceeds (£’000) Amount A (£’000) Amount B (£’000)
       
X (overseas) 100 10  
Y (overseas) 60   (5)

There is an accrued income profit of £5,000 which will be treated as deriving from the proceeds of sale of security X. Assuming the proceeds are paid into a new bank account, there will be a mixed fund comprising capital of £95,000 and an accrued income profit of £5,000.

Example 2

Isabelle has 3 holdings of ‘the same kind o’ foreign security, X, Y and Z. They are disposed of in an interest period and the proceeds are paid into separate accounts. They realise the following A and B amounts.

Security Proceeds (£‘000) Amount A (£’000) Amount B (£’000)
       
X (overseas) 100 7  
Y (overseas) 200 - (10)
Z (overseas) 70 4  

In this situation there is an accrued income profit of £1,000. If the proceeds of disposal of all 3 bonds are paid into a single account there will be a mixed fund with capital of £369,000 and an accrued income profit of £1,000.

If the proceeds were paid into separate accounts HMRC would expect the accrued income profit to be allocated pro rata in proportion to the Amount A of securities X and Z or, if this would create an unreasonable result, by any reasonable method.