Certain UK Government securities have been issued subject to
conditions that any profits (interest and profit on sale) are
exempt from tax so long as they are beneficially held by a person
not resident in the UK (‘free of tax to residents
abroad’ – FOTRA), or the securities are held in trust
and a non-ordinarily resident beneficiary is entitled to the
interest. The exemption from income tax is set out in Chapter 6 of
Part 6 ITTOIA05 (sections 713 to 716).
The FOTRA securities listed in ITTOIA05/S713 are securities
issued subject to the exemption in F(No.2)A 1931, gilt-edged
securities issued before 6 April 1998, and 3½% War Loan 1952.
Originally, FOTRA securities were issued under Treasury powers in
F(No 2)A 1931, FA 1940, and FA96/S154 (1). Under FA98/S161 any gilt
issued before 6 April 1998 is treated as if it were a FOTRA
security, and since then all gilts have been treated as issued
subject to FOTRA conditions.
In certain circumstances the exemption can apply where a
dealer holds a security and the interest or profit on sale is
taxable as trading income.
ITTOIA05/S755 exempt interest on certain foreign currency securities issued by local authorities or statutory corporations, and beneficially owned by a non-resident.
