Income and Corporation Taxes Act 1988

Interpretation U.K.

1 (1) For the purposes of this Schedule—

(a) M1 “adjusted issue price”, in relation to any security in a particular income period, is the aggregate of the issue price of the security and the income elements for all previous income periods;

(b) M2 “the amount payable on redemption” does not include any amount payable by way of interest;

(c) “a deep discount”, in relation to any redeemable security, means a discount which—

(i) represents more than 15 per cent. of the amount payable on redemption of that security; or

(ii) is 15 per cent. or less, but exceeds half Y per cent. of the amount so payable (where Y is the number of complete years between the date of issue of the security and the redemption date);

(d) subject to sub-paragraph (2) below, “a deep discount security” means any redeemable security which has been issued by a company, after 13th March 1984, at a deep discount, other than—

(i) a share in the company;

(ii) a security in respect of which the amount payable on redemption is determined by reference to the movement of the retail prices index or any similar general index of prices which is published by, or by an agent of, the government of any territory outside the United Kingdom; or

(iii) a security the whole or part of which, by virtue of section 209(2)(c), is a “distribution”;

[F1 (dd) “a deep discount security” also means any redeemable security which has been issued by a public body (at whatever time) at a deep discount, other than—

(i) a security such as is mentioned in paragraph (d)(ii) above;

(ii) a security falling within sub-paragraph (5), (6) or (7) below;]

(e) “a discount” means any amount by which the issue price of a redeemable security is less than the amount payable on redemption of that security;

(f) M3 “income period” means—

(i) in the case of a security carrying a right to interest, any period to which a payment of interest which falls to be made in respect of the security is attributable; and

(ii) in any other case, any year ending immediately before the anniversary of the issue of the security or any period of less than a year which begins on the issue or on such an anniversary and ends on the redemption date;

(g) M4 “the redemption date” in relation to any redeemable security, means the earliest date on which, under the terms on which the security is issued, the holder of the security will be entitled to require it to be redeemed by the company [F2 or the public body] which issued it;

(h) M5 “yield to maturity”, in relation to any security, means a rate (expressed as a percentage) such that if a sum equal to the issue price of the security were to be invested at that rate on the assumption that—

(i) the rate would be applied on a compounding basis at the end of each income period; and

(ii) the amount of any interest attributable to an income period would be deducted after applying the rate,

the value of that sum at the redemption date would be equal to the amount payable on redemption of the security; and

(j) M6 “chargeable security” has the meaning given by paragraph 2(5) below.

[F3 (1A) Notwithstanding anything in sub-paragraph (1) above, for the purposes of this Schedule a security is not a deep discount security if—

(a) it was issued by a company on or after 1st August 1990, and

(b) under the terms of issue it can be converted into share capital in a company (whether or not the company is the one which issued the security).]

[(1B) Notwithstanding anything in sub-paragraph (1) above, for the purposes of this Schedule a security is not a deep discount security if—

(a) it was issued on or after 1st August 1990, and

(b) under the terms of issue, there is more than one date on which the holder will be entitled to require it to be redeemed by the company or the public body which issued it.]

(2) M7 Where securities which were issued on or before 13th March 1984 have been exchanged at any time after that date for new securities which would be deep discount securities but for this sub-paragraph, the new securities shall not be treated as deep discount securities if—

(a) the old securities would not have been deep discount securities if they had been issued after 13th March 1984;

(b) the date which is the redemption date in relation to the new securities is not later than the date which was the redemption date in relation to the old securities; and

(c) the amount payable on redemption of the new securities does not exceed the amount which would have been payable on redemption of the old securities.

[F4 This sub-paragraph applies only in the case of securities issued by a company.]

(3) For the purposes of this Schedule, a security comprised in any letter of allotment or similar instrument shall be treated as issued unless the right to the security conferred by the letter or instrument remains provisional until accepted, and there has been no acceptance.

[F5 (4) For the purposes of this Schedule a public body is any of the following which is not a company—

(a) a government, whether of the United Kingdom or elsewhere;

(b) a public or local authority, whether in the United Kingdom or elsewhere.

(5) A security falls within this sub-paragraph if it is a gilt-edged security and—

(a) it was issued before 14th March 1989, or

(b) it was issued on or after that date but was issued under the same prospectus as any gilt-edged security issued before that date.

(6) A security falls within this sub-paragraph if it is a gilt-edged security and—

(a) it was issued under a prospectus under which no securities were issued before 14th March 1989,

(b) it was issued otherwise than on the occasion of the original issue under the prospectus, and

(c) all the securities issued on the occasion of the original issue under the prospectus are gilt-edged securities which are not deep discount securities.

(7) A security falls within this sub-paragraph if it is not a gilt-edged security and was issued (at whatever time) under the same prospectus as any other security which was issued before the security in question and which is not a deep discount security.

(8) For the purposes of this Schedule “gilt-edged security” has the same meaning as it has for the purposes of the [F6 1992] Act.]

Textual Amendments

F1 1989 s.93and Sch.10 para.2(2).And see s.126(3)—Treasury securities issued at a discount.

F2 1989 s.93and Sch.10 para.2(3).

F3 1990 s.56and Sch.10 paras.26(2), 29(4)on and after 9June 1989.

F4 1989 s.93and Sch.10 para.2(4).

F5 1989 s.93and Sch.10 para.2(5).

F6 Word in Sch. 4 para. 1(8) substituted (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch. 10 para. 14(57)(a) (with ss. 60, 101(1), 171, 201(3))

Modifications etc. (not altering text)

C1 See—1989 Sch.11 para.1(8)—application of definition to deep gain securities.1990 Sch.10 para.11(3)—application of definition to convertible securities.

C2 1990 s.59on and after 1August 1990.

Marginal Citations

M1 Source—1984 Sch.9 1(7); 1985 Sch.11 1(6), 4

M2 Source—1984 s.36(2), (5); 1985 Sch.11 1(6)

M3 Source—1984 Sch.9 1(7); 1985 Sch.11 1(6), 4

M4 Source—1984 s.36(2), (5); 1985 Sch.11 1(6)

M5 Source—1984 Sch.9 1(7); 1985 Sch.11 1(6), 4

M6 Source—1985 Sch.11 1(5)

M7 Source—1984 s.36(3), (4); 1985 Sch.11 1(6)