Ch330

Wow. So after posting this initially, that a DDS would be subject to CGT rather than income tax if sold before maturity, then all other responses from HMRC admins in response to this stating the opposite and contradicting the initial statement (as well as the documentation stating the opposite), you are now back to making the same statement. Which is it? If a T-bill is classed as a DDS, then if sold before maturity is it subject to CGT or income tax? This should be a simple yes or no question.

I was enquiring about a DDS. A US Treasury bond is classed as a DDS but is not a corporate bond, nor a Gilt-edged security. As they are the most liquid securities in the world, I would have thought there should be clear guidance on how they are treated for tax purposes in the UK, but it seems not. This was the guidance given by HMRC Admin 20 to the initial post: "As a Deeply Discounted Security (DDS), a US Treasury Bond would normally be subject to UK income tax on maturity. However, if redeemed or sold before maturity, the transaction would be subject to capital gains tax (CGT)." I was querying it, as it isn't consistent with the guidance given for the Disposal of Deeply Discounted Securities. Please can you just clarify, that for a US Treasury Bond that is classed as a DDS, a sale before maturity is subject to CGT, where as it would be subject to income tax on maturity (as per previous reply), and where it says this in the manual, as I can't find it.

Hello, Thanks for the reply. Unless I have misunderstood, all of the sections you reference and the conditions in section 117 are discussing corporate bonds, and there is no mention of UK or non-UK government or inflation indexed government bonds, so it is not relevant to this discussion. Please can you clarify why you think TCGA92/S117 is relevant for determining whether a government bond is a QCB.

Hello, I don’t understand why the sale of a DDS before maturity would be chargeable to CGT rather than income tax. Wouldn’t both redemption and a sale be classed as a Disposal under HMRC guidelines and therefore chargeable to income tax, or is selling before maturity not classed as “transfer by sale” and therefore not a Disposal? Thanks