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Posted Mon, 10 Jun 2024 21:54:12 GMT by selftax 2024
How to treat US Government Bond gains and income
Posted Thu, 13 Jun 2024 14:30:11 GMT by HMRC Admin 20
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 Savings and Investment Manual SAIM3010 - Deeply discounted securities: introduction for more information. 
Thank you.
Posted Fri, 14 Jun 2024 17:35:18 GMT by selftax 2024
Hi Admin 20 Thank you for your response. I have seen this response from HMRC before in these forums. This is not accurate and hence giving wrong information to tax payer about US government bonds T bills are one type of US government bonds Not all US government bonds are Tbills Tbills are US government bonds with less than 1 year maturity, they are issued at discount and with zero coupon, so your answer is accurate here that return is paid at maturity and taxed as income. I understand that. However, US government bonds with maturities longer than 1 year are issued at par with coupons and they pay interest every 6 months. They are not TBILLS! They are issued at par, they cant be DDS! I am asking about US government bonds and NOT TBILLS. My specific question: There is a US government bond with maturity of May 2030 with coupon of 0.625% that was issued in 2020 at 100(par). I bought it today at 80. The coupon of 0.625% is taxed as income. I understand Specific questions: 1) How does HMRC tax the difference between where I bought it (80) vs where I sell it? 2) How does HMRC tax the difference between where I bought it (80) vs at maturity? (some taxpayers imply in their posts there is a difference maturity vs a sale) Thank you so much for clarifying this Kind regards
Posted Wed, 19 Jun 2024 12:16:21 GMT by HMRC Admin 19
Hi,

The difference between T-bills and US government bonds is not relevant in the UK. They fall under the same umbrella of 'government securities'. The term ‘security’ is not defined in the legislation. It may be taken to have a broad meaning comparable to the definition in TCGA/S132 (3)(b). You can see information here:

CG53420 - Securities: debts: definition of debt on a security

Please have a look at the guidance at SAIM3010 onwards which includes the meaning of 'deeply discounted securities':

SAIM3010 - Deeply discounted securities

The following guidance has information for securites that are not deeply discounted:

SAIM2230 - Interest: specific inclusions: discounts: taxation   

The difference is treated as interest in either case.  

We can only provide general information and guidance on this forum. For an answer to a detailed question of this nature, you would need to seek professional advice.

Thank you.

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