Part 12Accrued income profits

Chapter 2Accrued income profits and losses

The payments treated as made on transfers

632Payment on transfer with accrued interest

1

In the case of a transfer of securities with accrued interest, for the purposes of this Chapter a payment is treated as made by the transferee to the transferor in the interest period in which the settlement day falls.

2

The amount of that payment depends on whether the transfer is under an arrangement by which the transferee accounts to the transferor separately—

a

for the consideration for the securities, and

b

for gross interest accruing to the settlement day.

3

If the transfer is under such an arrangement, the amount of the payment is the amount of gross interest which the transferee accounts for.

4

If—

a

the transfer is not under such an arrangement, and

b

the settlement day is itself an interest payment day for the securities,

the amount of the payment is the amount of interest payable on the securities on that day.

5

If—

a

the transfer is not under such an arrangement, and

b

the settlement day is not an interest payment day for the securities,

the amount of the payment is an amount equal to—

I×ABmath

where—

I is the interest payable on the securities on the first interest payment day after the settlement day (“the payment day”),

A is the number of days in the period beginning with the first day on which that interest accrues and ending with the settlement day, and

B is the number of days in the period beginning with the first day on which that interest accrues and ending with the payment day.

6

For the purposes of subsection (5), the first day on which that interest accrues is taken to be—

a

the day after the last interest payment day before the settlement day, or

b

if there was no interest payment day before the settlement day, the first day of the first interest period of the securities.

7

In a case where no one is treated as the transferor (see sections 648(4) and 649(5)), this section has effect as if—

a

in subsection (1) the words “to the transferor” were omitted, and

b

subsections (2), (3), (4)(a) and (5)(a) were omitted.

8

In a case where no one is treated as the transferee (see sections 621(2) and (3) and 648(2)), this section has effect as if—

a

in subsection (1) the words “by the transferee” were omitted, and

b

subsections (2), (3), (4)(a) and (5)(a) were omitted.

9

Subsections (2) to (5) are subject to section 662 (new securities issued with extra return: special rules about payments).

10

Subsections (4) and (5) are subject to section 659 (transfers with or without accrued interest: interest in default).