US Treasury Maturity

Hi Hope you are well! May I have to know that if I purchase a US Treasury as a discount e.g. 97.5. And holding to maturity in 100. What should I claim for the different of my return (2.5). Income tax or CGT? Thank you very much!

Hi
These are classed as Deeply Discounted Securities (DDS). ‘Deeply Discounted Securities’ (DDS) are government securities, commercial bonds and loan stock, where the amount paid on redemption is higher than the price at which they were issued.
The difference is the discount and represents the whole or part of the reward to the holder of the security for the use of the money borrowed by the security issuer.
Where certain conditions apply, the tax rules ensure that gains on such securities are taxed as income, rather than as capital gains. (Deeply discounted securities). 
If you invest in deeply discounted securities, put the difference between what you paid for the bond and what you redeem or sell it for in box 3 of SA101 (page Ai1). 

Hi Thank you for your reply! For another situation, if I sold the US Treasury before the maturity, should I tax the gains as CGT? Thank you very much!

Hi,
 

Please have a look at the examples at SAIM3020: Savings and Investment Manual  , to see if the early redemption disreagrds the deep discounted security rules.  Where there is an early redemption and it is not disregarded under ITTOIA05/S431, which is explained at SAIM3030, then the securities are taxable under income tax. Thank you.

Hi HMRC Admin 10 Hope you are well! Maybe I am miss represented in my first post. “ I purchase a US Treasury as a discount e.g. 97.5. And holding to maturity in 100. ” I would like to clarify that I purchase the bond in “second market” as 97.5. And the “issue price” is 100. May I have to know that the situation also same as your reply ? “These are classed as Deeply Discounted Securities (DDS). ‘Deeply Discounted Securities’ (DDS) are government securities, commercial bonds and loan stock, where the amount paid on redemption is higher than the price at which they were issued.” It’s because I am not to purchase the bond from the issuer. Then are the securities taxable under CGT when maturity? Thank you very much!

Hi,

Please refer to our previous answer posted on 5 October 2023.

Thank you.

Hi, I bought United States government treasury bills via a broker platform, and I held the bills until maturity. So, my gain was the difference between the discount price at which I bought and the price received at maturity. Would you please let me know whether the incidental cost of acquisition/ redemption (broker commission/fee) for the treasury bills can be deducted from my gain in these Deeply Discounted Securities (DDS), when I report the gain in my self assessment tax return. Thank you.

Hi,

US government bonds, sometimes known as T-bills or treasury bills are generally taxed as income rather than capital gains. The return is paid at maturity rather than regular interest payments. In the UK, these are known as deeply discounted securities, with the discount being the difference between the price at which they were issued and the price received at maturity.

On a foreign investment the income is the difference between the purchase and redemption price after each has been converted to sterling on the day the transactions took place, so includes any foreign exchange gains. Losses cannot be deducted. 

Have a look at below for more information. 

SAIM3010 - Deeply discounted securities

If you invest in deeply discounted securities, put the difference between what you paid for the bond and what you redeem or sell it for in box 3 of SA101 (page Ai1).  

Additional information (2023)

Additional information notes

Thank you.