Income Tax (Trading and Other Income) Act 2005 section 381

Discounts

Section 381 establishes that discounts are generally treated as interest for income tax purposes, with one important exception for deeply discounted securities.

• All discounts are treated as interest for the purposes of the Income Tax (Trading and Other Income) Act 2005.
• The only exception is for discounts arising on deeply discounted securities, which are taxed separately under their own rules.
• Deeply discounted securities are those covered by Chapter 8 of Part 4 of the Act, which has its own specific regime for taxing profits from such securities.
• The practical effect is that ordinary discounts follow the same tax rules as interest income, simplifying their treatment.