Jetlyn

Hi HMRC Admin 20 - You were the one who said (further up this comment chain) "However, if redeemed or sold before maturity, the transaction would be subject to capital gains tax (CGT)." I'm sure you'll agree SAIM 3010 is a long document referring to many different situations. Given both my and Ch330's confusion, could you please point to a chapter and paragraph of SAIM3010 that would support this? I hope my previous answer shows you I am trying to engage with this material and the relavant legislation, I have read SAIM3010 multiple times, and I'm not sure which part of it supports your statement earlier. Thanks in advance for your help!

Hi HMRC Admin 20, Thank you! Just to check - does this apply even though this is foreign income (the bonds were bought in dollars and sold for dollars, all done in the US)? Box 3 is in the category 'Other UK income'.

Hi, If I need to enter the information about redemption of a deeply discounted security on my Self-Assessment tax form, where would that go? I am assuming they would not go into interest or into dividends or capital gains, I cannot seem to find anywhere to put them. Thanks!

Hi HMRC Admin 25, I am also interested in where capital gains tax enters the picture. ITTOIA 2005 s427(1): "Income tax is charged on profits on the disposal of deeply discounted securities." ITTOIA 2005 s437(1): "References in this Chapter to the disposal of a deeply discounted security are— (a) to its redemption, (b) to its transfer by sale, exchange, gift or otherwise, including a transfer treated as made by subsection (3)..." Based on this, it sounds like whether a DDS is redeemed at maturity or sold prior to that, income tax prevails. However, I have seen several posts on the HMRC community where admins state that DDSes sold prior to maturity attract capital gains tax instead of income tax. Therefore I assume that must be true. I would very much like that to be true, and I would appreciate a citation to that effect. Thanks!

Hi Admin 10 - That is the SAIM page I was referring to. I was just asking if my understanding of that guidance was correct. Is it not?

It seems likely that these sorts of bonds are deeply discounted securities - an EE bond from January 1991 bought for $25 has a face value of $50. In 20 years, it is redeemable for face value (plus interest, which is ignored in DDS calculations). The test for a deeply discounted security in SAIM3020 is if the amount payable on maturity exceeds the issue price by .5% a year - in this case, 10%. Given that the face value exceeds the issue price by 100%, I think this is a deeply discounted security - does my math check out?

One further question - how would the gain be calculated with regard to currency fluctuations? Would gain be calculated by subtracting USD value at the date of redemption from USD value at date of purchase, and only then converted into GBP, or is there some other calculation that should be made?

I'm not sure if you understood the question. I and EE bonds are government bonds, the American equivalent of gilts, not life insurance policies. I've seen discussion on here that indicates they could be taxed in a variety of ways (as capital gains, regular income, interest). I'm sure they're taxable, but not sure of what the starting value would be seen as or the exact type of tax levied on them. Is there someone at HMRC who answers these questions?

Hi - how would gains on US I Bonds and EE Bonds be treated? If the bonds were gifted to a person, held to maturity, and then redeemed, would they be capital gains, interest, or nomal income? And would just the interest amount be reportable, or would the face value be included as well?