Income Tax (Trading and Other Income) Act 2005

150 Conversion etc. of securities held as circulating capital U.K.

(1) This section applies for the purpose of calculating the profits of a trade if—

(a) a transaction falling within subsection (2) occurs in relation to securities (“the original holding”), and

(b) a profit on the sale of the securities would be brought into account in calculating the profits of the trade.

(2) A transaction falls within this subsection if—

(a) it results in a new holding being treated as the same as the original holding as a result of sections 126 to 136 of TCGA 1992 (CGT roll-over relief in cases of conversion etc.), or

(b) it is treated, as a result of section 134 of TCGA 1992 (compensation stock), as an exchange for a new holding which does not involve a disposal of the original holding,

and it does not fall within section 151(1) or 152(1) below (exchanges of gilts for gilt strips and consolidation of gilt strips).

(3) This section does not apply to securities in respect of which unrealised profits or losses, calculated by reference to the fair value of the securities at the end of the period of account, are taken into account in the period of account in which the transaction occurs.

(4) The transaction is treated as not involving a disposal of the original holding and the new holding is treated as the same asset as the original holding.

(5) But if, under the transaction, the person carrying on the trade—

(a) receives consideration in addition to the new holding, or

(b) becomes entitled to receive such consideration,

subsection (4) applies as if the references to the original holding were to the proportion of the original holding given by the following fraction.

(6) The fraction is—

where—

NH is the market value of the new holding at the time of the transaction, and

C is the market value of the consideration at the time of the transaction or (if the consideration is cash) the amount of the consideration.

(7) In determining whether subsection (2)(a) applies as a result of section 135 or 136 of TCGA 1992, the reference to capital gains tax in section 137(1) of TCGA 1992 is to be read as a reference to income tax.

(8) In this section “securities” includes—

(a) shares,

(b) loan stocks or similar securities (whether secured or unsecured) of a government, a local or other public authority (in the United Kingdom or elsewhere) or a company,

(c) rights of unit holders in unit trust schemes to which TCGA 1992 applies as a result of section 99 of TCGA 1992,

[F1 (ca) rights of participants [F2 in schemes or funds to which TCGA 1992 applies as a result of section 103D of TCGA 1992,]]

(d) in the case of a company with no share capital, interests in the company possessed by members of the company,

(e) quoted options to subscribe for shares which are treated as shares as a result of section 147 of TCGA 1992, and

(f) earn-out rights which are assumed to be securities as a result of section 138A(3) of TCGA 1992.

Textual Amendments

F1 S. 150(8)(ca) inserted ((1.12.2009 for specified purposes, 1.4.2010 for specified purposes) (with effect in accordance with Sch. 22 para. 12 of the amending Act) by Finance Act 2009 (c. 10), Sch. 22 para. 11(3)(b); S.I. 2010/670, art. 2

F2 Words in s. 150(8)(ca) substituted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Collective Investment Schemes and Offshore Funds (Amendment of the Taxation of Chargeable Gains Act 1992) Regulations 2017 (S.I. 2017/1204), regs. 1(1), 11(b)