Corporation Tax Act 2009

Deeply discounted securities held before 1 October 2002 U.K.

59 (1) This sub-paragraph applies if— U.K.

(a) the condition in paragraph 17(1)(c) of Schedule 9 to FA 1996 (connection between issuing company and another company) is met as respects an accounting period beginning on or after 1 October 2002 as a result of the amendments made by paragraph 33 of Schedule 25 to FA 2002, but would not have been met in an accounting period beginning before that date, and

(b) the debtor relationship in question was a debtor relationship of the issuing company (within the meaning of section 407) on the first day of the company's first accounting period beginning on or after that date.

(2) If sub-paragraph (1) applies, section 407 does not apply in relation to that debtor relationship as a result of those amendments.

(3) This sub-paragraph applies if section 409 applies in a case where—

(a) the relevant period began before 1 October 2002,

(b) as a result of paragraph 18 of Schedule 9 to FA 1996 an amount (“the deferred amount”) was not brought into account by a company for the purposes of Chapter 2 of Part 4 of that Act in respect of a debtor relationship for an accounting period beginning before that date, and

(c) the deeply discounted security concerned has not been redeemed before the beginning of the company's first accounting period to which this Act applies.

(4) If sub-paragraph (3) applies, as regards any accounting period to which this Act applies, section 409(2) applies as if paragraph 18(2) of Schedule 9 to FA 1996, instead of preventing the bringing of amounts into account for any accounting period before that in which the security was redeemed, had provided for the deferred amount to be brought into account for the accounting period in which the security was redeemed rather than for the relevant period.

(5) In this paragraph—

• “deeply discounted security” has the same meaning as in Chapter 8 of Part 4 of ITTOIA 2005 (profits from deeply discounted securities) (see section 430 of that Act), and

• “the relevant period” has the same meaning as in section 409.

60 (1) This paragraph applies if— U.K.

(a) an authorised unit trust or open-ended investment company holds a deeply discounted security on the last day of the unit trust's or company's last accounting period beginning before 1 October 2002 (“the last old day”),

(b) the security was not transferred or redeemed on that day,

(c) there is an amount which, if the unit trust or company had made a transfer of that security on that day, by selling it for its adjusted closing value—

(i) would have been charged under paragraph 1 of Schedule 13 to FA 1996 under Case III or IV of Schedule D, or

(ii) would have been eligible for relief from tax on a claim for the purposes of paragraph 2 of Schedule 13 to FA 1996, and

(d) that amount has not fallen to be brought into account under paragraph 64(3) of Schedule 25 to FA 2002.

(2) That amount must be brought into account as a non-trading credit, or (as the case may be) a non-trading debit, for the purposes of Part 5 (loan relationships) for the relevant accounting period.

(3) The relevant accounting period is the accounting period in which falls the earliest of—

(a) the first day that falls after the last old day and is a day on which, under the terms on which the security was issued, the holder of the security is entitled to require it to be redeemed,

(b) the day on which the security is redeemed, and

(c) the day on which the unit trust or company makes a disposal of the security.

(4) For the purposes of sub-paragraph (1)(c), the “adjusted closing value” of a deeply discounted security held by the unit trust or company on the last old day is the amount which for the purposes of Chapter 2 of Part 4 of FA 1996 was the opening value, as at the first day of the unit trust's or company's first accounting period beginning on or after 1 October 2002, of the unit trust's or company's rights and liabilities under the relationship represented by that security.

(5) Paragraph 5(7) of Schedule 15 to FA 1996 (determination of opening value where accruals basis of accounting is used) applies for the purposes of sub-paragraph (4) as it applies for the purposes of paragraph 5 of that Schedule, but—

(a) taking the reference to 1 April 1996 as a reference to the first day of the unit trust's or company's first accounting period beginning on or after 1 October 2002, and

(b) applying paragraph 4 of that Schedule (determination of amounts treated as accruing on or after 1 April 1996) (as it had effect immediately before 1 April 2009) for these purposes with the same modification.

(6) In this paragraph—

• “creditor relationship” has the same meaning as in Part 5,

• “deeply discounted security” has the same meaning as in that Chapter (see section 430 of that Act),

• “open-ended investment company” has the same meaning as in section 468A of ICTA,

• “redeem” means—

  (a)

  make a disposal, within the meaning of Chapter 8 of Part 4 of ITTOIA 2005 (profits from deeply discounted securities), except by a transfer within the meaning of that Chapter, or

  (b)

  convert as mentioned in section 437(1)(c) of that Act, and

• “transfer” has the same meaning as in that Chapter.

(7) In this paragraph “the relevant period” has the same meaning as in section 409.