Income and Corporation Taxes Act 1988

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

(1) M1 Subsections (3) and (4) below shall have effect where a transaction to which this section applies occurs in relation to any securities (“the original holding”)—

(a) to which a person carrying on a banking business, an insurance business or a business consisting wholly or partly in dealing in securities is beneficially entitled; and

(b) which are such that a profit on their sale would form part of the trading profits of that business.

(2) This section applies to any transaction which, if the securities were not such as are mentioned in subsection (1)(b) above—

(a) would result in the original holding being equated with a new holding by virtue of sections [F1 126 to 136 of the 1992] Act (capital gains tax roll-over relief in cases of conversion etc.); or

(b) would be treated by virtue of section [F1 134] of that Act (compensation stock) as an exchange for a new holding which does not involve a disposal of the original holding;

but does not apply to any transaction in relation to which section 471 applies or would apply if the person concerned had not given a notice under that section.

(3) Subject to subsection (4) below, in making any computation in accordance with the provisions of this Act applicable to Case I of Schedule D of the profits or losses of the business—

(a) the transaction shall be treated as not involving any disposal of the original holding, and

(b) the new holding shall be treated as the same asset as the original holding.

(4) Where under the transaction the person concerned receives or becomes entitled to receive any consideration in addition to the new holding, subsection (3) above shall have effect as if references to the original holding were references to the proportion of it which the market value of the new holding at the time of the transaction bears to the aggregate of that value and the market value at that time (or, if it is cash, the amount) of the consideration.

(5) Subsections (3) and (4) above shall have effect with the necessary modifications in relation to any computation made for the purposes of section 76(2) in a case where securities held by the company concerned are equated with a new holding by virtue of any of sections [F1 126 to 136 of the 1992]Act or are treated as not disposed of by virtue of section [F1 134]of that Act.

(6) In this section “securities” includes shares, any security within the meaning of section [F2 132 of the 1992 Act] and any rights, interests or options which by virtue of section [F2 136(3), 147 or 99] of that Act are treated as shares for the purposes of sections [F2 126 to 136] of that Act.

(7) In determining for the purposes of subsection (2)(a) above whether a transaction would result in the original holding being equated with a new holding by virtue of section [F3 135 or 136 of the 1992] Act the reference in section [F3 137(1)] of that Act to capital gains tax shall be construed as a reference to income tax.

Textual Amendments

F1 Words in 473(2)(5) 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(1), Sch. 10 para. 14(27)(a) (with ss. 60, 101(1), 171, 201(3))

F2 Words in s. 473(6) 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(1), Sch. 10 para. 14(27)(b) (with ss. 60, 101(1), 171, 201(3))

F3 Words in s. 473(7) 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(1), Sch. 10 para. 14(27)(c) (with ss. 60, 101(1), 171, 201(3))

Marginal Citations

M1 Source—1977 s.46; 1979(C) Sch.7