Taxes Consolidation Act 1997 section 750

Persons entitled to exemption

Section 750 prevents bond-washing by tax-exempt bodies such as approved pension schemes and charities, by denying exemption on accrued interest included in the purchase price of a security.

• Where a tax-exempt body (the "first buyer") purchases a security, any exemption from tax it would normally enjoy does not extend to the accrued interest element of the purchase price, calculated in accordance with Schedule 21.
• If the first buyer makes an annual payment out of that interest, the entire annual payment is treated as paid out of profits or gains not brought into charge to tax, and section 238 applies accordingly.
• For corporation tax purposes, such an annual payment is not treated as a charge on income.
• The effect is that any tax due on the accrued interest cannot be offset against tax deducted from annual payments, nor claimed as a deduction as a charge on income.