Commentary on Sections Overview Overview
2731.This Chapter provides for exemption from income tax in respect of United Kingdom government securities which are beneficially owned by persons who are not resident in the United Kingdom. Such securities are described as being “Free of Tax to Residents Abroad” or “FOTRA securities”. The sections are based on section 154 of FA 1996 and section 161 of FA 1998.
2732.The beneficial owner of a FOTRA security may be entitled to an exemption from income tax in any of the following three situations:
	a person holding the security as an investment may be exempt from tax on the interest arising on the security;
	a dealer holding the security in circumstances where a profit on sale would be regarded as a trading receipt may be exempt from tax on the interest arising on the security; or
	a dealer holding the security in circumstances where a profit on sale would be regarded as a trading receipt may be exempt from tax on the profit arising from a purchase and sale of the security.
2733.It is not intended to rewrite section 22(1) of F(No 2)A 1931, section 60(1) of FA 1940 or section 154(1) of FA 1996. These provisions all concern the Treasury’s powers to issue securities. The first two provisions were left untouched in the 1952, 1970 and 1988 consolidations. (Section 47 of Finance (No 2) Act 1915 was repealed in 1927, but in terms to the effect that the repeal did not affect income tax exemptions attaching to securities previously issued.)