Part 4

Savings and investment income
Chapter 8

Profits from deeply discounted securities

Special rules for strips of government securities

Strips of government securities: acquisitions and disposals
445
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—
A × B/C
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).