US Treasury Bills

Hi HMRC, I have US Treasury Bills holding in my UK based broker account (Interactive Brokers UK), and I receive bond interest (coupon payment) in USD twice a year. Upon reviewing the related threads in the forum, could you please help to confirm if my understandings below are correct? 1) Report the bond interest received as foreign income and fill in SA106 form accordingly, making use of the approved exchange rate for GBP/USD. 2) Upon bond maturity, report the difference between what I paid for the bond and what I redeem it in box 3 of SA101 form (page Ai1), making use of the approved exchange rate for GBP/USD. 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 SAIM3010 - Deeply discounted securities: introductionfor more information.
Thank you.