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HMRC internal manual

Trusts, Settlements and Estates Manual

HM Revenue & Customs
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Capital items that are income for tax purposes: gilt strips

Gilt strips are deeply discounted securities and first became available in 1998. Unlike other deeply discounted securities (TSEM3225) there is a charge each year even if there is no disposal.

There is a deemed disposal on 5 April and deemed reacquisition on 6 April. Both are at the market value at 5 April. The taxable amount is the difference between the 5 April market value, and either:

  • the market value a year earlier, or
  • the price paid for them if they were acquired during the year.

The taxable amount is regarded as income, and chargeable at the trust rate. Trustees of an unauthorised unit trust are only chargeable to the trust rate on amounts which are not shown as income in the accounts. Where income from gilt strips is shown as income in the accounts of the authorised unit trust it is chargeable at basic rate.