Finance Act 1972

Interest etc. on certain kinds of securities

3 (1) Sub-paragraph (ii) of paragraph (d) of the said subsection (2) (securities convertible directly or indirectly into shares, being securities which are not quoted or comparable to any which are quoted) shall apply also to securities issued after 5th April 1972 which are not quoted or comparable as aforesaid and carry any right to receive shares in or securities of the company, and accordingly for that sub-paragraph there shall be substituted—

“(ii) securities convertible directly or indirectly into shares in the company or securities issued after 5th April 1972 and carrying any right to receive shares in or securities of the company, not being (in either case) securities quoted on a recognised stock exchange nor issued on terms which are reasonably comparable with the terms of issue of securities so quoted ; or”.

(2) In the case of any interest or other distribution to which the said paragraph (d) applies by virtue of so much of sub-paragraph (iii) thereof as relates to securities under which the consideration represents more than a reasonable commercial return for the use of the principal secured, that paragraph shall not operate so as to treat as a distribution so much of the interest or other distribution as represents a reasonable commercial return for the use of that principal.

(3) No amount shall be regarded for the purposes of the said paragraph (d) as representing the principal secured by a security issued after 5th April 1972 in so far as it exceeds any new consideration which has been received by the company for the issue of the security.

This sub-paragraph is without prejudice to section 237(6) of the Taxes Act (calculation of principal secured where securities are issued at a price less than the amount repayable on them).