Commentary on Sections Overview Overview Section 755: Interest on foreign currency securities etc. owned by non-UK residents
2858.This section is based on section 581 of ICTA. It provides an exemption from income tax for interest on certain foreign currency securities, or loans, beneficially owned by people who are not resident in the United Kingdom. The exemption is available only if the Treasury make an appropriate direction.
2859.Section 581(1)(a) of ICTA provides that, if a Treasury direction is made, interest on this type of security or loan is not subject to deduction of tax at source. This provision is not rewritten in this Chapter. It is rewritten as a new section 581A of ICTA (see paragraph 242 of Schedule 1 to this Act).
2860.The meaning of “foreign currency” in this section is dealt with separately in section 756.
2861.Subsection (1) sets out the interest within the scope of the exemption for the purposes of this section. Section 581 of ICTA originally applied only to securities issued by local authorities. It was later extended to cover securities issued by, or loans made to, statutory corporations by adding section 581(4) of ICTA.
2862.Subsection (2) sets out the conditions to be met if the exemption is to apply. The reference to “eventual repayment” in subsection (2)(b) of the section (and based on section 581(4) of ICTA) is relevant only for a loan with no immediate entitlement to repayment.
2863.Subsection (3) of the section is an anti-avoidance provision. Section 581(3) of ICTA is very widely drafted: “where any income of any person is by virtue of any provision of the Income Tax Acts to be deemed to be income of any other person, that income shall not be exempt ...”. In fact, there are only two sets of provisions under which this type of income could be deemed to be income of another person. The relevant provisions are listed in subsection (3) of the section.
2864.Subsection (4) reflects the effect of the devolution settlements. See Change 19 in Annex 1.