SAIM4040 - Accrued Income Scheme: what are ‘securities’?

Definition of ‘securities’

The AIS applies where ‘securities’ are ‘transferred’. SAIM4050 explains the meaning of ‘transfer’.

The AIS applies to all kinds of negotiable interest bearing stocks and bonds. ITA07/S619 defines ‘securities' as any loan stock or similar security, other than an ‘excluded security’, of the UK government, of any other government, of any public or local authority in the United Kingdom or elsewhere, or of any company or other body. It does not matter whether or not the securities are secured, carry a right to interest of a fixed amount or at a fixed rate per cent of the nominal value of the security, or are in bearer form. ‘Securities’ includes building society shares that are qualifying corporate bonds (see CG53700 onwards), but does not include any other shares in a company.

Thus virtually all forms of negotiable interest bearing financial instruments (including gilts) are brought within the AIS, unless specifically excluded. ‘Excluded securities’ are

• national or war savings certificates,
• certificates of deposit and other ‘deposit rights’ within ITTOIA05/S552 ( SAIM2500),
• securities that meet the ‘redemption conditions’ – in effect securities issued at a discount and paying no interest,
• most deeply discounted securities ( SAIM3000).

ITA07/S619 (6) defines ‘securities of the same kind'. This is important for the calculation of accrued income profits and losses. Securities are of the same kind if they are so treated by the practice of a recognised stock exchange, or would be so treated if dealt with on such a stock exchange. For example, Treasury 5% 2004 is not the same kind as Treasury 5% 2012. This is similar to the capital gains tax concept of securities of a particular class (see CG50205 SAIM20000).