Commentary on Sections Overview Chapter 2: Accrued income profits and losses Section 661: Successive transfers with unrealised interest in default
1956.This section modifies the application of section 660 where the securities have previously been transferred with unrealised interest in default. It is based on section 719(4) of ICTA.
1957.Subsection (1) applies where the transferor originally acquired the securities with unrealised interest. In that case, A (see commentary on section 660) is reduced by the value of the right to receive the interest (“B”) on the day the transferor acquired the securities (see subsection (5)). That is, the transferor is now given credit for the amount of consideration given for that value when the securities were acquired.
1958.But, if the transferor has received any of the interest in the meantime (or an amount on account of that interest), subsection (4) applies so that B is reduced by the amount of the interest received, thus increasing A. That is, to the extent the transferor has received the benefit of B, and has therefore recouped some of the consideration given for the securities, the credit given against the amount now chargeable, on the present transfer of the securities, is reduced.
1959.Subsection (6) makes clear that the amount of the reduction of A is itself reduced to nil where the amount of the credit found under subsection (4) or (5) exceeds the value found under subsection (1) by reference to section 660. That is, if the transferor has recouped amounts equal to or exceeding the value of the right to receive unrealised interest, at the time the securities were acquired, there is no credit to set against the value, A, which is now used in section 634(2) rather than the amount of the unrealised interest itself.
1960.Paragraph 127 of Schedule 2 saves the transitional rule that was in section 716(6) of ICTA (as substituted by section 719(4) of ICTA). That paragraph disapplies this section if the acquisition of the securities by the transferor occurred before 28 February 1986.