Income and Corporation Taxes Act 1988

[F1 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 [F2 company] 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 F3 . . . —

(a) [F4 results] in the original holding being equated with a new holding by virtue of sections [F5 126 to 136 of the 1992] Act (capital gains tax roll-over relief in cases of conversion etc.); or

(b) [F6 is] treated by virtue of section [F5 134] of that Act (compensation stock) as an exchange for a new holding which does not involve a disposal of the original holding;

F7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

[F8 (2A) 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 a period of account, are taken into account in the period of account in which the transaction mentioned in subsection (2) above occurs.

(2B) Subsection (2A) above shall be disregarded in determining for the purposes of section 66 of the Finance Act 2002 (election to continue postponement of mark to market) whether an asset was held by a person on 1st January 2002.]

(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 [F2 company] 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) F9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) In this section “securities” includes shares, any security within the meaning of section [F10 132 of the 1992 Act] and any rights, interests or options which by virtue of section [F10 [F11 135(5), 136(5)], 147 or 99] of that Act are treated as shares for the purposes of sections [F10 126 to 136] of that Act.

(7) In determining for the purposes of subsection (2)(a) above whether a transaction [F4 results] in the original holding being equated with a new holding by virtue of section [F12 135 or 136 of the 1992] Act the reference in section [F12 137(1)] of that Act to capital gains tax shall be construed as a reference to income tax.

Textual Amendments

F1 Ss. 468H-468R and cross-headings inserted (with effect in accordance with Sch. 14 para. 7 of the amending Act) by Finance Act 1994 (c. 9), Sch. 14 para. 2

F2 Words in s. 473(1)(4) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 183 (with Sch. 2)

F3 Words in s. 473(2) repealed (with effect in accordance with s. 67(4)(a) of the repealing Act) by Finance Act 2002 (c. 23), s. 67(1)(a), Sch. 40 Pt. 3(8), Note

F4 Words in s. 473(2)(a)(7) substituted (with effect in accordance with s. 67(4)(a) of the amending Act) by Finance Act 2002 (c. 23), s. 67(1)(b)

F5 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))

F6 Word in s. 473(2)(b) substituted (with effect in accordance with s. 67(4)(a) of the amending Act) by Finance Act 2002 (c. 23), s. 67(1)(c)

F7 Words in s. 473(2) repealed (with effect in accordance with s. 101(3) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 27 Pt. 3(23), Note 1

F8 S. 473(2A)(2B) inserted (with effect in accordance with s. 67(4)(a) of the amending Act) by Finance Act 2002 (c. 23), s. 67(2)

F9 S. 473(5) repealed (with effect in accordance with s. 164(5) of the repealing Act) by Finance Act 1996 (c. 8), Sch. 41 Pt. 5(24), Note

F10 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))

F11 Words in s. 473(6) substituted (with effect in accordance with Sch. 9 para. 8(2) of the amending Act) by Finance Act 2002 (c. 23), Sch. 9 para. 4(4)

F12 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