Income and Corporation Taxes Act 1988

Section 57.

SCHEDULE 4 U.K. DEEP DISCOUNT SECURITIES

Modifications etc. (not altering text)

C1 Sch. 4 modified (27.7.1993) by 1993 c. 34, s. 64(2)

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 1979 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).

Modifications etc. (not altering text)

C2 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.

C3 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)

Charge to tax after acquisition of certain securities U.K.

2 (1) M8 This sub-paragraph applies to deep discount securities issued by a company on or after 19th March 1985 where one or both of the following applies—

(a) immediately before the issue the assets held by the company included relevant securities with a value equal to at least 75 per cent. of the value of all the assets held by it;

(b) the terms of issue of the deep discount securities are determined by the company by reference to (though not necessarily in such a way that they reflect) the terms of issue of relevant securities which are held by the company when the deep discount securities are issued or which it intends to acquire later.

(2) This sub-paragraph applies to deep discount securities issued by a company where—

(a) sub-paragraph (1) above would apply if the references to relevant securities included references to United Kingdom corporate bonds; and

(b) the company acquired those bonds on or after their issue (by another company) in circumstances where sub-paragraph (1) above would have applied if they had been deep discount securities.

(3) This sub-paragraph applied to deep discount securities of a particular kind issued by a company and in the case of which—

(a) neither of the preceding sub-paragraphs applies; and

(b) at any time in the first income period of the securities of that kind the assets held by the company include relevant securities with a value equal to at least 75 per cent. of the value of all the assets held by it.

(4) This sub-paragraph applies to deep discount securities issued by a company where either—

(a) they are issued on a conversion to which section 82 of the 1979 Act applies of old securities; or

(b) they are issued by a company in exchange for old securities in circumstances in which section 85(3) of the 1979 Act applies or are treated as so issued by virtue of section 86(1) of that Act;

and in this sub-paragraph “old securities” means deep discount securities to which sub-paragraph (1), (2) or (3) above or this sub-paragraph applies, except that securities to which sub-paragraph (3) above applies are not old securities unless sub-paragraph (3)(b) has been fulfilled in their case by the time the conversion or exchange concerned takes place.

(5) In the following provisions of this Schedule “chargeable security” means a deep discount security to which any of the preceding sub-paragraphs applies.

(6) In this paragraph—

• “relevant securities” means securities within the meaning of section 710, but excluding United Kingdom corporate bonds;

• “terms of issue” includes terms relating to amounts payable on redemption or by way of interest, or to times of payment of such amounts; and

• “value” in relation to assets means the price they might reasonably be expected to fetch on a sale in the open market.

(7) For the purposes of this paragraph—

(a) a company holds assets if it has a beneficial interest in them and acquires them if it acquires such an interest in them; and

(b) securities are of the same kind if they are treated as being of the same kind by the practice of a stock exchange, or would be so treated if dealt with on a stock exchange.

(8) In this paragraph “United Kingdom corporate bonds” means securities—

(a) issued by a company resident in the United Kingdom at the time of issue;

(b) the debt on which represents and has at all times represented a normal commercial loan, as defined in paragraph 1(5) of Schedule 18; and

(c) which are expressed in sterling and in respect of which no provision is made for conversion into, or redemption in, a currency other than sterling.

(9) For the purposes of sub-paragraph (8)(c) above—

(a) a security shall not be regarded as expressed in sterling if the amount of sterling falls to be determined by reference to the value at any time of any other currency or asset; and

(b) a provision for redemption in a currency other than sterling but at the rate of exchange prevailing at redemption shall be disregarded.

Marginal Citations

M8 Source—1985 s.46 Sch.11 1

3 (1) M9 Where a person acquires a chargeable security, the chargeable amount shall be treated as income chargeable to tax under Case III or IV (as the case may be) of Schedule D on each of the following occasions—

(a) the end of each income period to fall within the period of ownership;

(b) the end of any income period which ends but does not begin in the period of ownership.

(2) In sub-paragraph (1) above “the chargeable amount” means—

(a) where paragraph (a) applies, an amount equal to the income element for the income period;

(b) where paragraph (b) applies, an amount equal to the income element for the part of the income period falling within the period of ownership.

(3) The income chargeable shall (notwithstanding anything in sections 64 to 67) be taken into account in computing tax charged for the year of assessment in which the occasion concerned occurs.

Marginal Citations

M9 Source—1985 Sch.11 2(1)-(3)

Charge to tax on disposal of securities U.K.

4 (1) M10 On the disposal by any person of any deep discount security—

(a) an amount which represents the accrued income attributable to the period between his acquisition and disposal of the security (the “period of ownership”), less any amount or amounts treated as income by virtue of paragraph 3 above, shall be treated as income chargeable to tax under Case III or, as may be, Case IV of Schedule D; and

(b) the tax shall (notwithstanding anything in sections 64 to 67 but subject to sub-paragraph (5) below) be computed on the income so arising from any disposal made in the year of assessment.

(2) M11 The amount which represents the accrued income attributable to any period of ownership is the aggregate of the income elements for each income period or part of an income period in the period of ownership.

(3) In relation to any security, the income element for any income period shall be determined by applying the formula—

where—

• A is the adjusted issue price;

• B is the yield to maturity; and

• C is the amount of interest (if any) attributable to the income period.

(4) The income element for any period (the “short period”) falling within an income period shall be determined by applying the formula—

where—

• I is the income element for the income period in which the short period falls;

• P is the number of days in the short period; and

• Y is the number of days in that income period.

(5) Where—

(a) by virtue of sub-paragraph (1) above income tax is chargeable under Case IV of Schedule D, and

(b) the person making the disposal satisfies the Board, on a claim in that behalf, that he is not domiciled in the United Kingdom, or that, being a British subject or a citizen of the Republic of Ireland, he is not ordinarily resident in the United Kingdom,

the tax shall be computed on the amounts, if any, received in the United Kingdom in the year of assessment in question in respect of the sum mentioned in sub-paragraph (1)(a) above (any such amounts being treated as income arising when they are received in the United Kingdom).

(6) For the purposes of sub-paragraph (5) above—

(a) there shall be treated as received in the United Kingdom all amounts paid, used or enjoyed in, or in any manner or form transmitted or brought to, the United Kingdom; and

(b) subsections (6) to (9) of section 65 shall apply as they apply for the purposes of subsection (5) of that section.

(7) Sections 348 to 350 and 123 shall not apply to so much of the proceeds of redemption of a deep discount security as represents income chargeable to tax under Case III or, as may be, Case IV of Schedule D.

[F6 F7 (8) In the case of a deep discount security issued by a public body, this paragraph applies where a disposal is made on or after 14th March 1989 (whatever the date of acquisition).]

Textual Amendments

F6 1989 s.93and Sch.10 para.3

F7 See—1988 s.452(8)—special reserve funds.1988 s.687(3)(h)—payments under discretionary trusts.

Marginal Citations

M10 Source—1984 Sch.9 1(1)(a), (b); 1985 Sch.11 2(4)

M11 Source—1984 Sch.9 1(2)-(6), (9)

Deduction of income element from total profits of company and allowance as charge on income U.K.

5 (1) M12 In computing the corporation tax chargeable for any accounting period of a company which has issued any deep discount security, the income element in respect of that security for any income period ending in or with that accounting period shall be allowed as a deduction against the total profits of the company for the accounting period as reduced by any relief other than group relief.

(2) The income element for any income period ending in or with an accounting period of a company which has issued a deep discount security shall be treated for the purposes of the Corporation Tax Acts, other than those of section 338(1), as a charge on income paid by the company in the accounting period.

(3) No income element in respect of any deep discount security shall be so allowed or treated unless—

(a) the cost of paying so much of the amount payable on redemption as represents the discount is ultimately borne by the company;

(b) the income element would not otherwise be deductible in computing the issuing company’s profits or any description of those profits for purposes of corporation tax; and

(c) at least one of the conditions mentioned in sub-paragraph (4) below is satisfied.

(4) The conditions are—

(a) that the company exists wholly or mainly for the purpose of carrying on a trade;

(b) that the deep discount security was issued wholly and exclusively to raise money for purposes of a trade carried on by the company;

(c) that the company is an investment company.

(5) Where, on redemption of any deep discount security, any part of the amount payable on redemption is, by virtue of section 209(2)(d) and (e), a distribution of the company, sub-paragraphs (1) and (2) above shall not apply to any income element in respect of that security.

(6) Relief shall not be given under any provision of the Tax Acts in respect of any income element if (at any time) a scheme has been effected or arrangements have been made such that the sole or main benefit that might be expected to accrue to the company from the issue of the security in question is the obtaining of a reduction in tax liability by means of that relief.

(7) In sub-paragraph (6) above “relief” means relief by way of deduction in computing profits or gains or deduction or set-off against income or total profits; and where the relief is claimed by virtue of section 403(7) any question under this paragraph as to what benefit might be expected to accrue from the transaction in question shall be determined by reference to the claimant company and the surrendering company taken together.

Marginal Citations

M12 Source—1984 Sch.9 3(1)-(5), (9), (10)

6 (1) M13 Section 494 shall apply in relation to income elements in respect of deep discount securities and paragraph 5 above as it applies in relation to interest and section 338.

(2) In the application of section 494 to any deep discount security, subsection (2)(b) shall have effect as if the references to the rate at which interest was payable were references to the aggregate of the rate of interest payable and the amount of any income element in respect of the security for the period in question.

Marginal Citations

M13 Source—1984 Sch.9 4

Disposals U.K.

7 (1) M14 Subject to sub-paragraphs (2) and (3) below, there is a disposal of a deep discount security for the purposes of this Schedule if there would be such a disposal for the purposes of the 1979 Act.

(2) Notwithstanding anything in section 49(1)(b) of that Act (no deemed disposal on death), where the assets of which a deceased person was competent to dispose include any deep discount security that security shall, for the purposes of this Schedule, be deemed to have been disposed of by the deceased immediately before his death.

(3) M15 In any case where—

(a) there is a conversion of securities to which section 82 of the 1979 Act applies and those securities include deep discount securities; or

(b) securities including deep discount securities are exchanged (or by virtue of section 86(1) of that Act are treated as exchanged) for other securities in circumstances in which section 85(3) of that Act applies,

then the securities converted or exchanged shall (subject to sub-paragraph (4) below and notwithstanding section 78 of that Act) be treated for the purposes of the charge to tax under paragraph 4 above as having been disposed of immediately before the time of the conversion, or, as the case may be, the exchange, by the person who was the beneficial owner of the securities at that time.

(4) M16 Where a person would (but for this sub-paragraph) be treated by sub-paragraph (3) above as having, for the purposes of paragraph 4 above, disposed of deep discount securities, other than chargeable securities, which are converted into, or exchanged for, other deep discount securities—

(a) he shall not be so treated—

(i) if 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 converted or exchanged securities; and

(ii) no consideration is given for the conversion or exchange other than the new securities; but

(b) the amount of the accrued income attributable to his period of ownership of the converted or exchanged securities (including any amount added by virtue of the previous operation of this paragraph) shall be added to the amount of the accrued income attributable to his period of ownership of the new securities.

Marginal Citations

M14 Source—1984 Sch.9 2

M15 Source—1984 Sch.9 8(1), (2)(a)

M16 Source—1984 Sch.9 8(3); 1985 Sch.11 2(5)

8 (1) M17 Where any deep discount security is disposed of and acquired under a contract, the time at which the disposal and acquisition is made is the time at which the contract is made (and not, if different, the time at which the security is transferred).

(2) If the contract is conditional (and in particular if it is conditional on the exercise of an option) the time at which the disposal and acquisition is made is the time when the condition is satisfied.

Marginal Citations

M17 Source—1984 Sch.9 10

Securities issued and owned by associated companies or group companies U.K.

9 (1) M18 Where a deep discount security issued by a company is at any time beneficially owned by another company which is—

(a) an associated company (within the meaning of section 416) of the issuing company; or

(b) a member of a group of companies of which the issuing company is also a member;

paragraph 5(1) and (2) above shall apply to any linked income element with the addition, after the words “the accounting period” of the words “in which the security is redeemed”.

(2) In this paragraph “linked income element” means the income element in respect of the security in question for any income period in which the security is at any time beneficially owned by the other company.

(3) For the purposes of this paragraph, two companies shall be deemed to be members of a group of companies if one is a 51 per cent. subsidiary of the other or both are 51 per cent. subsidiaries of a third company.

Marginal Citations

M18 Source—1984 Sch.9 5-7; 1985 Sch.11 2(7)

Close companies U.K.

10 (1) Where a deep discount security issued by a close company is at any time beneficially owned by—

(a) a participator in the company;

(b) an associate of such a participator; or

(c) a company of which such a participator has control,

paragraph 5(1) and (2) above shall apply to any linked income element with the addition, after the words “the accounting period”, of the words “in which the security is redeemed”.

(2) In sub-paragraph (1) above “linked income element” means the income element in respect of the security in question for any income period in which the security is at any time beneficially owned by a person mentioned in that sub-paragraph.

(3) Any amount which a close company is allowed, by virtue of paragraph 5(1)above, to deduct from its total profits for any accounting period shall be treated for the purposes of section 423as if it were interest paid by the company in that periodF8 .

(4) In this paragraph—

• “associate” has the meaning given in section 417(3) and (4);

• “control” shall be construed in accordance with section 416(2) to (6); and

• “participator” means a person who is, in relation to a company, a participator for the purposes of Part XI (by virtue of section 417) other than a person who is a participator for those purposes by virtue only of his holding a deep discount security issued by the company.

(5) In determining whether a person who carries on a business of banking is a participator in a company for the purposes of this paragraph, there shall be disregarded any securities of the company acquired by him in the ordinary course of his business.

Textual Amendments

F8 Repealed by 1989 s.187and Sch.17 Part Vin relation to accounting periods beginning after 31March 1989.

Early redemption U.K.

11 (1) Where any deep discount security [F9 issued by a company] is redeemed before the redemption date by the company which issued it, paragraphs 4, 5, 7(1) and (2) and 8 to 10 above shall have effect subject to the provisions of this paragraph.

(2) The accrued income attributable to the period between the acquisition of the security by the person who, immediately before its redemption, was the beneficial owner of the security and its redemption shall be the amount paid to him on redemption of the security less the issue price of the security or, in a case where he did not acquire it on its issue, less the aggregate of—

(a) the issue price; and

(b) the accrued income attributable to the period beginning with the issue, and ending with his acquisition, of the security;

and, if in either case paragraph 3 above applies, less also an amount equal to the chargeable amount (within the meaning of that paragraph).

(3) The deduction allowed under paragraph 5(1) above in relation to the accounting period in which the deep discount security is redeemed shall be the amount paid by the company on redemption less the aggregate of—

(a) the issue price of the security; and

(b) the accrued income attributable to the period beginning with the issue of the security and ending with the last income period to end in or with the accounting period of the company which precedes that in which the security is redeemed.

(4) Where paragraph 9 or 10 above has applied to the deep discount security at any time, the amount mentioned in sub-paragraph (3)(b) above shall not include any linked income element (within the meaning of that paragraph).

(5) Where the aggregate mentioned in sub-paragraph (3) above exceeds the amount paid by the company on redemption of the security, the amount of the excess or, if it is less, the amount mentioned in paragraph (b) of that sub-paragraph shall be treated as income of the company—

(a) arising in the accounting period in which the security is redeemed; and

(b) chargeable to tax under Case VI of Schedule D.

(6) Where a resolution is passed, an order made or any other act takes place for the winding up of a company which has issued a deep discount security before the security is redeemed, this paragraph shall have effect in relation to any payment made in respect of the security in the course of the winding up as if the payment were made on redemption. [.]

Textual Amendments

F9 1989 s.93and Sch.10 para.4.

11A Where any deep discount security issued by a public body is redeemed before the redemption date by the body which issued it, paragraph 4 above shall have effect subject to paragraph 11(2) above (ignoring the words following paragraph (b))

Modifications etc. (not altering text)

C4 1989 s. 93and Sch. 10 para. 5.

Valid from 25/07/1991

[F10 Issue price] U.K.

Textual Amendments

F10 Sch. 4 para. 11B and heading preceding it inserted by Finance Act 1991 (c. 31, SIF 63:1), s. 54, Sch. 4 paras.3, 5

F11 11B (1) This paragraph applies where—

(a) securities (old securities) of a particular kind are issued by way of the original issue of securities of that kind,

(b) on a later occasion securities (new securities) of the same kind are issued,

(c) a sum (the extra return) is payable in respect of each new security, by the person issuing it, to reflect the fact that interest is accruing on the old securities,

(d) the issue price of each new security includes an element (whether or not separately identified) representing payment for the extra return, and

(e) the extra return is equal to the amount of interest payable for the relevant period on each old security.

(2) In such a case, the issue price of each new security shall be deemed for the purposes of paragraphs 1(1)(a), (e) and (h) and 11(2) and (3) above to be its actual issue price less an amount equal to the extra return payable in respect of the security.

(3) For the purposes of this paragraph securities are of the same kind if they are treated as being of the same kind by the practice of a recognised stock exchange or would be so treated if dealt with on such a stock exchange.

(4) For the purposes of this paragraph the relevant period is the period beginning with the day following the relevant day and ending with the day on which the new securities are issued.

(5) For the purposes of this paragraph the relevant day is—

(a) the last day of the last (or only) income period to end in respect of the old securities before the day on which the new securities are issued, or

(b) the day on which the old securities were issued, in a case where no income period ended in respect of them before the day on which the new securities are issued.

Textual Amendments

F11 Sch. 4 para. 11B and heading preceding it inserted by Finance Act 1991 (c. 31, SIF 63:1), s. 54, Sch. 12 paras. 3, 5

Identification of securities disposed of U.K.

12 M19 The rules contained in section 88 of the Finance Act 1982 (identification, for the purposes of capital gains tax, of securities disposed of) shall apply for the purposes of this Schedule as they apply for the purposes of capital gains tax.

Marginal Citations

M19 Source—1984 Sch.9 11(1)

Information U.K.

13 (1) M20 Every company which issues deep discount securities shall cause to be shown on the certificate of each such security the income element for each income period between the date of issue of the security and the redemption date.

(2) Every company which issues a chargeable security to which paragraph 2(1), (2) or (4) above applies shall cause to be shown on the certificate of each such security the fact that tax is chargeable under paragraph 3 above.

[F12 (3) Every public body which issues deep discount securities on or after 1st August 1989 shall cause to be shown on the certificate of each such security the income element for each income period between the date of issue of the security and the redemption date.]

Textual Amendments

F12 1989 s.93and Sch.10 para.6.

Marginal Citations

M20 Source—1984 Sch.9 1(8); 1985 Sch.11 3

Charities U.K.

14 M21 A charity shall be exempt from income tax in respect of an amount which (apart from this paragraph) is chargeable to income tax by virtue of this Schedule if the amount is applicable and applied for charitable purposes.

In this paragraph “charity” has the same meaning as in section 506.

Marginal Citations

M21 Source—1984 Sch.9 12; 1987 Sch.15 16(3)

[F13 Retirement benefit schemes] U.K.

Textual Amendments

F13 1989 s.93and Sch.10 para.7.

15 (1) In a case where—

(a) paragraph 4 above would apply (apart from this paragraph) to a disposal of a security, and

(b) immediately before the disposal was made the security was held for the purposes of an exempt approved scheme (within the meaning of Chapter I of Part XIV),

that paragraph shall not apply to the disposal.

(2) Sub-paragraph (1) above shall not apply unless the disposal is made on or after 14th March 1989.

Stock lending U.K.

16 (1) In a case where—

(a) a security is the subject of a transfer which falls within section 129(3), and

(b) the transfer constitutes a disposal to which (apart from this paragraph) paragraph 4 above would apply,

that paragraph shall not apply to the disposal.

(2) Sub-paragraph (1) above shall not apply unless the disposal is made on or after 14th March 1989.

Trustees U.K.

17 (1) Where on the disposal by trustees of a deep discount security an amount is treated as income chargeable to tax by virtue of paragraph 4(1) above, the rate at which it is chargeable shall be a rate equal to the sum of the basic rate and the additional rate for the year of assessment in which the disposal is made.

(2) Where the trustees are trustees of a scheme to which section 469 applies, sub-paragraph (1) above shall not apply if or to the extent that the amount is treated as income in the accounts of the scheme.

(3) Sub-paragraph (1) above shall not apply unless the disposal is made on or after 14th March 1989.

Underwriters U.K.

18 (1) An underwriting member of Lloyd’s shall be treated for the purposes of this Schedule as absolutely entitled as against the trustees to the securities forming part of his premiums trust fund, his special reserve fund (if any) and any other trust fund required or authorised by the rules of Lloyd’s, or required by the underwriting agent through whom his business or any part of it is carried on, to be kept in connection with the business.

(2) Sub-paragraph (1) above applies where a disposal is made on or after 14th March 1989 (whatever the date of acquisition).

(3) Where a security forms part of a premiums trust fund at the end of 31st December of any relevant year, for the purposes of this Schedule the trustees of the fund shall be deemed to dispose of the security at that time; and for this purpose relevant years are 1989 and subsequent years.

(4) Where a security forms part of a premiums trust fund at the beginning of 1st January of any relevant year, for the purposes of this Schedule the trustees of the fund shall be deemed to acquire the security at that time; and for this purpose relevant years are 1990 and subsequent years.

(5) Sub-paragraph (6) below applies where the following state of affairs exists at the beginning of 1st January of any year or the end of 31st December of any year—

(a) securities have been transferred by the trustees of a premiums trust fund in pursuance of an arrangement mentioned in section 129(1) or (2),

(b) the transfer was made to enable another person to fulfil a contract or to make a transfer,

(c) securities have not been transferred in return, and

(d) section 129(3) to the transfer made by the trustees.

(6) The securities transferred by the trustees shall be treated for the purposes of sub-paragraphs (3) and (4) above as if they formed part of the premiums trust fund at the beginning of 1st January concerned or the end of 31st December concerned (as the case may be).

(7) Paragraph 7 above shall have effect subject to sub-paragraph (3)above.

(8) Paragraph 7(2) above shall not apply where—

(a) the deceased was an underwriting member of Lloyd’s who died on or after 14th March 1989, and

(b) immediately before his death the security concerned formed part of a premiums trust fund, a special reserve fund or any other trust fund required or authorised by the rules of Lloyd’s, or required by the underwriting agent through whom the deceased’s business or any part of it was carried on, to be kept in connection with the business.

(9) In a case where an amount treated as income chargeable to tax by virtue of paragraph 4(1) above constitutes profits or gains mentioned in section 450(1)—

(a) section 450(1)(b) shall apply; and

(b) paragraph 4(1)(b) above shall not apply.

(10) For the purpose of computing income tax for the year 1987-88 sub-paragraph (9) above shall have effect as if—

(a) the reference to section 450(1) were to paragraph 2 of Schedule 16 to the Finance Act 1973, and

(b) the reference to section 450(1)(b) were to paragraph 2(b) of that Schedule.

(11) In this paragraph “business” and “premiums trust fund” have the meanings given by section 457.

Modifications etc. (not altering text)

C5 See 1979(C) s.132A(5)(6)—deep discount securities.

Gilts: special rules U.K.

19 (1) In a case where—

(a) securities have been issued by a public body under a prospectus under which no securities were issued before 14th March 1989,

(b) some of the securities issued under the prospectus are gilt-edged securities which are would-be deep discount securities,

(c) some of the securities issued under the prospectus are gilt-edged securities which are not would-be deep discount securities, and

(d) there is a time when the aggregate nominal value of the securities falling within paragraph (b) above (at that time) exceeds the aggregate nominal value of the securities falling within paragraph (c) above (at that time),

sub-paragraph (2) below shall apply in relation to any gilt-edged security which has been or is issued under the prospectus at any time (whether before, at or after the time mentioned in paragraph (d) above).

(2) As regards any event occurring in relation to the security after the time mentioned in sub-paragraph (1)(d) above, paragraphs 4, 7, 8, 11A, 12 and 14 to 18 above shall have effect as if—

(a) the security were a deep discount security,

(b) it had been issued as such (whatever the time it was issued), and

(c) it had been acquired as such (whatever the time it was acquired).

(3) For the purposes of sub-paragraph (1) above a would-be deep discount security is a security which would be a deep discount security apart from paragraph 1(6) above.

(4) For the purposes of sub-paragraph (2) above events, in relation to a security, include anything constituting a disposal for the purposes of the 1979 Act, the death of a person competent to dispose of the security, a disposal mentioned in paragraph 18(3) above, and an acquisition mentioned in paragraph 18(4) above.

Non-gilts: special rules U.K.

20 (1) In a case where—

(a) all the securities issued by a public body on the occasion of the original issue under a particular prospectus (whatever the time of the issue) are neither gilt-edged securities nor deep discount securities,

(b) some of the securities issued under the prospectus are not gilt-edged securities but are new would-be deep discount securities, and

(c) there is a time when the aggregate nominal value of the securities falling within paragraph (b) above (at that time) exceeds the aggregate nominal value of the securities which (looking at the state of affairs at that time) have been issued under the prospectus and are neither gilt-edged securities nor new would-be deep discount securities,

sub-paragraph (2) below shall apply in relation to any security which is not a gilt-edged security but which has been or is issued under the prospectus at any time (whether before, at or after the time mentioned in paragraph (c) above).

(2) As regards any event occurring in relation to the security after the time mentioned in sub-paragraph (1)(c) above, paragraphs 4, 7, 8, 11A, 12 and 14 to 18 above shall have effect as if—

(a) the security were a deep discount security,

(b) it had been issued as such (whatever the time it was issued), and

(c) it had been acquired as such (whatever the time it was acquired).

(3) For the purposes of sub-paragraph (1) above a new would-be deep discount security is a security which—

(a) would be a deep discount security apart from paragraph 1(7) above, and

(b) was issued on or after 14th March 1989.

(4) For the purposes of sub-paragraph (2) above events, in relation to a security, include anything constituting a disposal for the purposes of the 1979 Act, the death of a person competent to dispose of the security, a disposal mentioned in paragraph 18(3) above, and an acquisition mentioned in paragraph 18(4) above.

[F14 Convertible securities: special rules] U.K.

Textual Amendments

F14 1990 s.56and Sch.10 paras.26(3), 29(4)on and after 9June 1989.

21 In a case where—

(a) a security is a qualifying convertible security, for the purposes of Schedule 10 to the Finance Act 1990, at the time of its issue, and

(b) apart from this paragraph it would be a deep discount security at that time,

the security shall be treated, at the time of its issue and at all subsequent times, as not being a deep discount security.