Part 4

Savings and investment income
Chapter 8

Profits from deeply discounted securities

Calculating profits

Securities issued in accordance with qualifying earn-out right
442
1
This section applies if a security is issued to a person in accordance with the terms of a qualifying earn-out right.
2
The amount paid by the person to acquire the security is to be taken for the purposes of this Chapter to be the total of—
a
the market value, immediately before the issue, of the right to be issued with the security in accordance with the terms of the qualifying earn-out right, and
b
any amount payable for the issue in accordance with those terms.
3
In this section “qualifying earn-out right” means a right that meets conditions A to C, or so much of a right as does so.
4
Condition A is that the right constitutes the whole or part of the consideration for—
a
the transfer by the person on whom the right is conferred of shares in or debentures of a company, or
b
the transfer of the whole or part of—
i
a business carried on by that person, or by that person and others in partnership, or
ii
an interest in such a business.
5
Condition B is that the right is either—
a
a right to be issued with securities of another company, or
b
a right which is capable of being discharged in accordance with its terms by the issue of such securities.
6
Condition C is that the right is such that the value of the consideration mentioned in condition A is unascertainable at the time when the right is conferred.
Pt. 4 Ch. 8 applied (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), ss. 406(4), 1329(1) (with Sch. 2 Pts. 1, 2)