ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Mar 6, 2017 15:37:40 GMT
Zero coupon bonds or any debt issued at a deep discount (those issued at 0.5%pa+ discount to maturity value) are generally taxed as income at maturity. There are a few exceptions to this treatment eg for life insurance policies, but none would seem to apply in this case. There is a benefit for non-UK resident investors as the the return is received free from withholding tax even though the discount has a UK source. It is also worth noting that in addition to specific income treatment of zero coupon bonds, there are income tax legislation on disguised income which acts to tax as income any amounts received that is economically equivalent to interest. This is a fairly basic tax avoidance 101 measure to prevent structuring of debt products so to avoid recognition of income or mis-characterising disguised interest as a capital gain. Thanks nick , after doing further research. Income Tax(Trading and Other Income) Act 2005 PROFITS FROM DEEPLY DISCOUNTED SECURITIES Charge to tax on profits from deeply discounted securities (1) Income tax is charged on profits on the disposal of deeply discounted securities. (2) The profits are treated as income for income tax purposes if they would not otherwise be income. HMRC Manual SAIM3000 onwards if you want all the rules (and a headache)
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pom
Member of DD Central
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Post by pom on Mar 7, 2017 12:58:22 GMT
Thanks nick , after doing further research. Income Tax(Trading and Other Income) Act 2005 PROFITS FROM DEEPLY DISCOUNTED SECURITIES Charge to tax on profits from deeply discounted securities (1) Income tax is charged on profits on the disposal of deeply discounted securities. (2) The profits are treated as income for income tax purposes if they would not otherwise be income. HMRC Manual SAIM3000 onwards if you want all the rules (and a headache) Does the pig do head massages?! Thanks for digging it out for us.
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phil
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Post by phil on Mar 7, 2017 15:08:12 GMT
Zero coupon bonds or any debt issued at a deep discount (those issued at 0.5%pa+ discount to maturity value) are generally taxed as income at maturity. There are a few exceptions to this treatment eg for life insurance policies, but none would seem to apply in this case. There is a benefit for non-UK resident investors as the the return is received free from withholding tax even though the discount has a UK source. 0.5% is regarded as a "deep" discount!! They're having a laugh, can't be anyone in their right mind who would define a miserly 0.5% as being a deep discount!
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