Commentary on Sections Overview Chapter 3: Exemptions relating to interest on securities Section 679: Interest on securities involving accrued income losses: general
2005.This section provides an exemption for interest on securities by reference to accrued income losses arising in respect of those securities. It is based on section 714(3) to (5) of ICTA.
2006.This is the commonest way in which exemption for interest on securities by reference to accrued income losses is given.
2007.Subsection (1) explains the conditions to be satisfied before relief is given and subsection (2) explains how much of the interest is exempt from tax. If the amount of interest exceeds the accrued income loss, the excess remains subject to income tax (i.e. under Chapter 2 of Part 4 of ITTOIA or, where a settlor is chargeable on the settlement income under Chapter 5 of Part 5 of ITTOIA, under that Chapter).
2008.For individuals, interest is taxed in the tax year in which it arises. So the tax year in which the accrued income losses arise will be the same as the tax year in which the interest is taxed.
2009.For partnerships, interest may be taxed more than once in different tax years (and may therefore be taxed in a different tax year from that in which it arises). Subsection (3) prevents any person from being entitled to a reduction from interest in more than one tax year, and restricts the year when the reduction may be made to the tax year in which the interest period ends.
2010.See Change 107 in Annex 1 which substitutes an exemption for a reduction and determines the tax year for which the exemption is available to partners.