Taxes Consolidation Act 1997 section 815

Taxation of income deemed to arise on certain sales of securities

Section 815 counters "bond washing", a practice whereby the owner of a security sells it shortly before an interest payment date so that the accrued interest is received as an exempt capital gain rather than as taxable income.

• Where the owner of a security sells or transfers it and the interest becomes payable to another person, the owner is charged to tax under Case IV of Schedule D on the interest deemed to have accrued on a day-to-day basis up to the date of disposal.
• If the owner arranges to buy back or reacquire the security (or a similar security), the charge is based on the interest deemed to have accrued up to the next interest payment date after the sale.
• The section does not apply where the security has been held continuously for at least two years, or where the seller is a dealer in securities taxed under Case I of Schedule D, among other exclusions.
• Revenue may require any person who issues a security, any agent of that person, or any owner of a security to furnish information necessary to determine whether a charge to tax arises under this section.