SAIM4310 - Accrued Income Scheme: special calculations: foreign currency securities

Foreign securities: translation into sterling

ITA07/S664 provides rules for translation into sterling of the payments made on the transfer of securities where the interest on securities is payable in a currency other than sterling.

If the interest is accounted for separately between transferor and transferee, and the parties specify in their contact what the sterling equivalent of the accrued or rebate interest is, the sterling amount so specified is to be used in the AIS calculations. Otherwise, the amount is to be determined in the foreign currency according to the usual rules, and then translated into sterling at the rate of exchange prevailing on the settlement day for the transfer, calculated by reference to the London closing rate of exchange for the day concerned.

The nominal value of foreign securities is also determined (under ITA07/S677) as the sterling equivalent of that value on any day, calculated by reference to the London closing rate for that day.

Where unrealised interest is payable in a foreign currency, ITA07/S665 provides that the amount the accrued income profits under ITA07/S631 is the sterling equivalent on the settlement day, or in the case of interest in default ( SAIM4290), the value on the day of receipt.

Although the London closing rate should in strictness be used in all the above cases, figures of rates of exchange supplied by taxpayers or their agents should normally be accepted, provided that they come from a reputable source (for example, an exchange rate quoted by the taxpayer’s bank for the day in question) and the basis is used consistently.