Income Tax (Trading and Other Income) Act 2005 Explanatory Notes

Section 427: Charge to tax on profits from deeply discounted securities

1731.This section charges to tax profits on deeply discounted securities which arise when the security is disposed of (for whatever reason) or, in certain circumstances, is treated as being disposed of. It also ensures that gains which would not otherwise be income are treated as such. The section is based on paragraph 1 of Schedule 13 to FA 1996.

1732.Although Schedule 13 to FA 1996 refers to a “relevant discounted security”, this Act uses the term “deeply discounted security”. This seems a more appropriate term to reflect both the nature of the security and the nature of the tax charge while distinguishing this regime from the “deep gain securities” regime of Schedule 11 to FA 1989.

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