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There were 2 questions in the exam kit that confused me.
1.) Manon purchased £200,000 (nominal value) gilts, paying interest at 1%, for £211,000 on 1 September 2019. Interest is payable half yearly on 30 June and 31 December.
He sold the gilts on 1 December 2020 for £213,000 (including accrued interest).
How much will Manon include in savings income in respect of the gilts in the tax year
2020/21?2.) Ahmed purchased £10,000 (nominal value) gilts, paying interest at 2%, for £11,000 on 1 June 2020. Interest is payable half yearly on 31 March and 30 September.
He sold the gilts on 29 February 2021 for £11,400 (including accrued interest).
How much will Ahmed include in savings income in respect of the gilts in the tax year
2020/21?Question 1 was simply interest received + interest accrued, but in question 2 why was there a deduction of interest accrued prior to purchase and Q1 didnt have?
The accrued income scheme only applies in the tax year of purchase / sale.
Both questions ask you to deal with 2020/21 but only in question 2 is 2020/21 the year of purchase – in question 1 the purchase was in 2019//20
Have you worked through the study note section on this issue and the related example?Hi there, I have worked through the study note and still struggling with this section, especially the second example – Ahmed. Could you give us some clearer explanation as well as a time frame, if that’s not too much to ask for?
Thanks.As I stated in the answer above to this query, the difference in treatment is due to the fact that in the first example the purchase took place in 2019/20 tax year and is therefore irrelevant in computing the assessment for the 2020/21 tax year, whereas in the second example BOTH the purchase and sale took place in 2020/21.
The example given in the study notes shows what happens to the purchaser in the year of purchase – see section 3.3 on page 8 of the study notes.
I do not have the Kaplan kit so I have not seen how they have shown the answer – I can only explain why there will be a difference in computing the 20/21 assessment in the 2 examples.
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