Taxes Consolidation Act 1997 Schedule 21 paragraph 2

>Restricting artificial losses for exempt bodies

Paragraph 2 of Schedule 21 defines the "appropriate amount" of interest used to restrict artificial losses on securities transactions involving tax-exempt bodies, for the purposes of sections 750 and 751.

• When a tax-exempt body, charity or pension fund buys a security cum dividend and sells it ex dividend, the resulting artificial loss is restricted.
• The restriction works by treating the purchase price as reduced by the accrued interest included in that price, known as the "appropriate amount in respect of the interest".
• The appropriate amount is the gross amount corresponding to the appropriate proportion of the net interest receivable by the first buyer.
• The gross amount is calculated as the net amount of interest plus the associated tax credit.