11.Paragraph 5 inserts a new section 89AB into FA 1986.
12.Subsection (1) of new section 89AB provides that the section applies where P and Q have entered into an arrangement to which section 89AA applies, the only reason that the conditions in subsections (2A) and (3) of that section are not fulfilled is because chargeable securities of the same kind and amount as those transferred to P or his nominee are not returned to Q or his nominee, and the conditions in subsection 89AB(2) are fulfilled.
13.The conditions in new section 89AB(2) are that P and Q are not connected persons, that, after Q has transferred securities under the arrangement, either P or Q becomes insolvent, and it becomes apparent that, as a result of the insolvency, the securities will not be returned to Q or his nominee in accordance with the arrangement.
14.New section 89AB(3) provides that SDRT charges under section 87 of FA 1986 will not apply to the transfer of securities to P or his nominee or Q or his nominee under the arrangement.
15.New section 89AB(4) provides that sub-sections (5) and (6) apply where the solvent party to the arrangement acquires replacement securities before the end of the period of 30 days beginning with the date on which the insolvency occurs.
16.New section 89AB(5) provides that, where collateral is provided under the arrangement, SDRT will not be chargeable on any agreement to transfer replacement securities to the solvent party or his nominee where the solvent party uses the collateral provided to make the acquisition, or where the amount of collateral is insufficient, the solvent party uses his own funds to make up the balance of the cost of the replacement securities.
17.New section 89AB(6) provides that, where no collateral is provided, SDRT will not be chargeable on any agreement to transfer replacement stock to the solvent party or his nominee.
18.New section 89AB(7) provides that subsections (5) and (6) apply where the replacement purchase is effected by more than one agreement or by agreements with more than one person..
19.New section 89AB(8) restricts the application of subsections (5) and (6) to purchases of replacement securities up to the amount of securities that will not be transferred as a result of the insolvency.
20.New sections 89AB(9) (10) define what is meant, for the purposes of the section, by a person ‘becoming insolvent’, ‘collateral’ and ‘replacement securities’.