I hope someone can advise me about my mother's income tax self assessment
for 08-09 where one of her financial statements has an entry for
on UK Government stock. One figure is a gross interest, fair enough. Then
another entry shows "Accrued Interest Paid" which is a negative number.

Is there an explanation for this negative interest and how is it entered
on the SA return?

Pliers wrote:

I hope someone can advise me about my mother's income tax self assessment
for 08-09 where one of her financial statements has an entry for
on UK Government stock. One figure is a gross interest, fair enough. Then
another entry shows "Accrued Interest Paid" which is a negative number.

Is there an explanation for this negative interest and how is it entered
on the SA return?

In general terms "accrued interest" means interest which has been, so to
speak, "earned", but which has not yet been paid. For instance you accrue
interest on a bank deposit account continuously, or daily, but it isn't
normally credited to the account daily, but just quietly clocks up somewhere
in the background, and is credited only on certain days, typically monthly,
quarterly, or yearly.

So if "accrued interest" is interest *not paid*, the term "accrued interest
paid" is strictly speaking an oxymoron (a self-contradiction). I'm not
familiar with government stock management practice, but would imagine your
mother's holding is wrapped in some kind of notional account into which
interest accrues continuously, or perhaps even incrementally (that'll be
the figure for "gross interest"). In that case the "accrued interest paid",
especially if it's a negative number, almost certainly represents a transfer
into some other account, probably her usual current account, and so you
should be able to track it down there. For income tax purposes, you should
disregard both this negative figure and the corresponding positive figure in
the current account, and just enter the original "gross interest" as earned.

On 22 June, 22:59, Ronald Raygun
wrote:
Pliers wrote:
I hope someone can advise me about my mother's income tax self assessment
for 08-09 where one of her financial statements has an entry for
on UK Government stock. One figure is a gross interest, fair enough. Then
another entry shows "Accrued Interest Paid" which is a negative number.

Is there an explanation for this negative interest and how is it entered
on the SA return?

In general terms "accrued interest" means interest which has been, so to
speak, "earned", but which has not yet been paid. *For instance you accrue
interest on a bank deposit account continuously, or daily, but it isn't
normally credited to the account daily, but just quietly clocks up somewhere
in the background, and is credited only on certain days, typically monthly,
quarterly, or yearly.

So if "accrued interest" is interest *not paid*, the term "accrued interest
paid" is strictly speaking an oxymoron (a self-contradiction). *I'm not
familiar with government stock management practice, but would imagine your
mother's holding is wrapped in some kind of notional account into which
interest accrues continuously, or perhaps even incrementally (that'll be
the figure for "gross interest"). *In that case the "accrued interest paid",
especially if it's a negative number, almost certainly represents a transfer
into some other account, probably her usual current account, and so you
should be able to track it down there. *For income tax purposes, you should
disregard both this negative figure and the corresponding positive figure in
the current account, and just enter the original "gross interest" as earned.

Ronald

I don't think it's as simple as that.

The OP needs to get an explanation of the statement from the preparer.

PeterSaxton wrote:

Ronald
I don't think it's as simple as that.
The OP needs to get an explanation of the statement from the preparer.

Do you think there's something unusual going on?

On 23 June, 00:22, Ronald Raygun
wrote:
PeterSaxton wrote:
Ronald
I don't think it's as simple as that.
The OP needs to get an explanation of the statement from the preparer.

Do you think there's something unusual going on?

Yes. Why is accrued interest paid a negative number but there's no
accrued interest as a positive number?

In , Pliers wrote:


I hope someone can advise me about my mother's income tax self
assessment
for 08-09 where one of her financial statements has an entry for
on UK Government stock. One figure is a gross interest, fair enough.
Then
another entry shows "Accrued Interest Paid" which is a negative
number.


Was the stock purchased during that tax year? If so, your mother would
have had to pay the seller for the interest that the stock had earned
since the previous interest payment date (6-monthly for most gilts);
then on the next interest payment date, your mother receives a full 6
months worth of interest, but for tax purposes can then set off the
cost of the accrued interest paid out on purchase.

http://www.hmrc.gov.uk/guidance/ais.htm

might help

--
Roger Morton

PeterSaxton wrote:

On 23 June, 00:22, Ronald Raygun
wrote:
PeterSaxton wrote:
Ronald
I don't think it's as simple as that.
The OP needs to get an explanation of the statement from the preparer.

Do you think there's something unusual going on?

Yes. Why is accrued interest paid a negative number but there's no
accrued interest as a positive number?

But there was. The OP wrote "One figure is a gross interest ... Then
another entry shows ...".

However, the explanation meanwhile offered by Roger Morton seems highly
plausible, i.e. that, following the usual periodic crediting of interest,
the portion of the interest which had accrued before the stock was
purchased was deducted and remitted to the previous holder, and that
therefore only the difference should count as the current holder's
income for tax purposes.

On 23 June, 10:08, Ronald Raygun
wrote:
PeterSaxton wrote:
On 23 June, 00:22, Ronald Raygun
wrote:
PeterSaxton wrote:
Ronald
I don't think it's as simple as that.
The OP needs to get an explanation of the statement from the preparer.

"Roger Morton" wrote in message
In , Pliers wrote:

I hope someone can advise me about my mother's income tax self
assessment
for 08-09 where one of her financial statements has an entry for
on UK Government stock. One figure is a gross interest, fair enough.
Then
another entry shows "Accrued Interest Paid" which is a negative
number.

Was the stock purchased during that tax year?

Yes.
The stock was bought on 9/5/08. The gross distribution was made on 7/9/08 so
the previous distribution would have been on 7/3/08.

If so, your mother would
have had to pay the seller for the interest that the stock had earned
since the previous interest payment date (6-monthly for most gilts);
then on the next interest payment date, your mother receives a full 6
months worth of interest, but for tax purposes can then set off the
cost of the accrued interest paid out on purchase.

http://www.hmrc.gov.uk/guidance/ais.htm

might help

So it suggests the amount to declare is distribution minus accrued.

Very helpful, thanks. Much more so than the issuer of the tax certificate
managed. Hopefully they will be more forthcoming to second time of asking.

Roger Morton wrote:


Was the stock purchased during that tax year? If so, your mother would
have had to pay the seller for the interest that the stock had earned

At least the last time I had non-zero accrued interest, the accrued
interest could actually end up applying to the tax year following the
transaction, dependent on the real interest payment date.

Also, accrued interest is always gross.

There may be special rules for overseas securities.