The ‘accrued income scheme’ is designed to counter
the avoidance of higher rate income tax by the conversion of income
from fixed-interest securities into capital gain.
Broadly, where an individual transfers interest-bearing
securities between 28 February 1986 and 6 April 1996, the
individual will be a charged to income tax on the interest accrued
on a daily basis. Death is treated as a deemed transfer under
FA85/SCH23/PARA12 (1) and you may allow a deduction for any
consequential income tax liability against the value of the death
estate.
The charge on death was removed by FA96/S158. From 6 April
1996 the vesting of assets in the personal representatives on death
is no longer a transfer for accrued income scheme purposes. No
charge or relief is due to the deceased person.
