Income Tax (Trading and Other Income) Act 2005

445 Strips of government securities: acquisitions and disposals

(1) A person who receives strips of a security (“the underlying security”) in exchange for the underlying security is treated as having acquired each strip by the payment of an amount equal to—

where—

• A is the market value of the underlying security at the time of the exchange,

• B is the market value of the strip at that time, and

• C is the total of the market values at that time of all the strips received in the exchange.

(2) For the purposes of this Chapter—

(a) a person who holds a strip of a security on 5th April in any tax year is treated as having transferred the strip on that day, and

(b) an amount equal to its market value on that day is treated as payable on the transfer.

(3) For the purposes of this Chapter that person is also treated as having immediately re-acquired the strip for the same amount.

(4) Subsections (2) and (3) do not apply if there is any other disposal of the strip on that day.

(5) Section 439(4) (deduction of incidental expenses incurred before 27th March 2003) does not apply to transfers and reacquisitions within subsections (2) and (3).

(6) For the purposes of this Chapter—

(a) the consolidation of a strip of a security with other such strips into a single security is a disposal of the strip by the person consolidating it (whether or not it would be apart from this subsection), and

(b) an amount equal to the market value of the strip at the consolidation is treated as payable on the disposal.

(7) Section 438 (timing of transfers and acquisitions) does not apply to an exchange within subsection (1) or a consolidation within subsection (6).

(8) Subsections (1) and (6) apply instead of sections 440(4) (market value on general conversions of deeply discounted securities) and 441 (market value acquisitions).