Finance Act 1989

1 (1) For the purposes of this Schedule a deep gain security is a redeemable security (whenever issued) which fulfils the first and second conditions.

(2) The first condition is that, taking the security at the time it is issued and assuming redemption, the amount payable on redemption might constitute a deep gain; and if the security is capable of redemption on one of a number of occasions, this condition is fulfilled if it is fulfilled as regards any one of them.

(3) For the purposes of sub-paragraph (2) above “redemption” does not include any redemption which may be made before maturity only at the option of the person who issued the security (and no other person).

(4) The second condition is that the security—

(a) is not a deep discount security (either because the amount payable on redemption is not known at issue or for some other reason),

(b) is not a share in a company,

(c) is not a qualifying indexed security,

(d) is not a convertible security, and

(e) does not fall within sub-paragraph (5), (6) or (7) below.

(5) A security falls within this sub-paragraph if it is a gilt-edged security and—

(a) it was issued before 14th March 1989, or

(b) it was issued on or after that date but was issued under the same prospectus as any gilt-edged security issued before that date.

(6) A security falls within this sub-paragraph if it is a gilt-edged security and—

(a) it was issued under a prospectus under which no securities were issued before 14th March 1989,

(b) it was issued otherwise than on the occasion of the original issue under the prospectus, and

(c) all the securities issued on the occasion of the original issue under the prospectus are gilt-edged securities which are not deep gain securities.

(7) A security falls within this sub-paragraph if it is not a gilt-edged security and was issued (at whatever time) under the same prospectus as any other security which was issued before the security in question and which is not a deep gain security.

(8) For the purposes of this paragraph—

(a) a deep discount security is a security which is a deep discount security for the purposes of Schedule 4 to the Taxes Act 1988,

(b) “qualifying indexed security” has the meaning given by paragraph 2 below, and

(c) a gilt-edged security is a security which is a gilt-edged security for the purposes of the [1979 c. 14.] Capital Gains Tax Act 1979.

(9) For the purposes of this paragraph the amount payable on redemption of a security constitutes a deep gain if the issue price is less than the amount so payable, and the amount by which it is less represents more than—

(a) 15 per cent. of the amount so payable, or

(b) half Y per cent. of the amount so payable, where Y is the number of complete years between the date of issue and the redemption date.

(10) For the purposes of this paragraph the amount payable on redemption does not include any amount payable by way of interest.