Finance Act 1946

59 Exchange of securities in connection with conversion operations, nationalisation, etc.

(1) If—

(a) any securities to which a person who is carrying on a trade which consists wholly or partly in dealing in securities is beneficially entitled are exchanged for other securities ; and

(b) the exchange is one to which this section applies,

then (whether or not any additional consideration is given for the exchange) that person shall, unless he gives notice in writing to the surveyor not later than the end of the year of assessment next following the year of assessment in which the exchange takes place, that he desires not to be so treated, be treated for income tax purposes (except as regards any income tax payable in respect of dividends or interest), both at the time of the exchange and thereafter, as if the exchange had not taken place, and in that case the produce of any subsequent realisation of any of the securities received by him under the exchange (together with any additional consideration or the appropriate part of any additional consideration received by him thereunder) shall be treated as the produce of the realisation of the corresponding securities surrendered by or transferred from him under the exchange, or of a corresponding part thereof, as the case may be.

(2) The exchanges to which this section applies are—

(a) any exchange under any arrangement which is being carried out under section two of the National Loans Act, 1939, if the Treasury direct, in pursuance of that arrangement, that this section shall apply to exchanges thereunder ;

(b) any exchange of securities effected by section one of the [9 & 10 Geo. 6. c. 27.] Bank of England Act, 1946 ; and

(c) any exchange of securities effected in pursuance of any enactment passed after the fifth day of April, nineteen hundred and forty-six, which provides for the compulsory acquisition of any securities and the issue of other securities in lieu thereof, if the Treasury direct that this section shall apply to exchanges of securities effected in pursuance of that enactment.

(3) Where a person who is carrying on a trade or business which consists wholly or partly in dealing in securities does not give such a notice to the surveyor as is provided for by subsection (1) of this section and is accordingly treated for income tax purposes in relation to the exchange in the manner specified in the said subsection (1), he shall be treated in the same manner in computing profits for the purposes of. excess- profits tax or the national defence contribution and the said subsection (1) shall, with the necessary adaptations, have effect accordingly, and in computing capital for the purposes of excess profits tax, he shall be treated as if the securities received by him under the exchange had been acquired by him by purchase at a price equal to the amount of capital (computed in accordance with the enactments relating to excess profits tax) represented, at the time of the exchange, by the securities surrendered by him or transferred from him under the exchange, less the amount or value of any other consideration received by him thereunder.

(4) In this section, the expression " securities " includes shares, stock, bonds, debentures and debenture stock.