Part 4

Savings and investment income
Chapter 8

Profits from deeply discounted securities

Special rules for corporate strips

Corporate strips: acquisitions and disposals
452F
1
A person who converts an interest-bearing corporate security into corporate strips of the security is treated as having acquired each corporate strip by the payment of an amount equal to—
A × B/C
where—
A is the acquisition cost of the converted corporate security;
B is the market value of the corporate strip;
C is the total of the market values of all the separate assets resulting from the conversion.
2
If the converted corporate security is a deeply discounted security—
a
its conversion into corporate strips is to be treated for the purposes of this Chapter as a transfer of the security, but
b
the amount payable on the transfer is taken to be an amount equal to the acquisition cost of the converted corporate security.
3
For the purposes of this Chapter—
a
the consolidation of a corporate strip with other corporate strips into a single security is a disposal of the corporate 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 corporate strip at the consolidation is treated as payable on the disposal.
4
Section 438 (timing of transfers and acquisitions) does not apply to a conversion within subsection (1) or a consolidation within subsection (3).
5
Subsections (1) to (3) apply instead of sections 440(4) (market value on general conversions of deeply discounted securities) and 441 (market value acquisitions).
6
For the purposes of this section, the acquisition cost of the converted corporate security is the amount paid in respect of his acquisition of the security by the person who has it immediately before the conversion (no account being taken of any costs incurred in connection with that acquisition).
7
References in this section to the market value of a security given or received in exchange for, or otherwise converted into, another are references to its market value at the time of the exchange or conversion.
Ss. 452A-452G and preceding cross-heading inserted (retrospectively) by Finance (No. 2) Act 2005 (c. 22), s. 39, Sch. 7 para. 25(8)(10)
Ss. 452A-452G and preceding cross-heading inserted (retrospectively) by Finance (No. 2) Act 2005 (c. 22), s. 39, Sch. 7 para. 25(8)(10)
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)