(1)For the purposes of this section, a “corporate bond” is a security, as defined in section 132(3)(b)—
(a)the debt on which represents and has at all times represented a normal commercial loan; and
(b)which is expressed in sterling and in respect of which no provision is made for conversion into, or redemption in, a currency other than sterling,
and in paragraph (a) above “normal commercial loan” has the meaning which would be given by sub-paragraph (5) of paragraph 1 of Schedule 18 to the Taxes Act if for paragraph (a)(i) to (iii) of that sub-paragraph there were substituted the words “ corporate bonds (within the meaning of section 117 of the 1992 Act) ”.
(2)For the purposes of subsection (1)(b) 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.
(3)For the purposes of this section “corporate bond” also includes a security which is not included in the definition in subsection (1) above, and which—
(a)is a deep gain security for the purposes of Schedule 11 to the M1Finance Act 1989 (“the 1989 Act”), or
(b)by virtue of paragraph 21(2) of Schedule 11 to the 1989 Act falls to be treated as a deep gain security as there mentioned, or
(c)by virtue of paragraph 22(2) of that Schedule, falls to be treated as a deep gain security as there mentioned, or
(d)by virtue of paragraph 22A(2) or 22B(3) of that Schedule, falls to be treated as a deep gain security as mentioned in the paragraph concerned.
(4)For the purposes of this section “corporate bond” also includes a share in a building society—
(a)which is a qualifying share,
(b)which is expressed in sterling, and
(c)in respect of which no provision is made for conversion into, or redemption in, a currency other than sterling.
(5)For the purposes of subsection (4) above, a share in a building society is a qualifying share if—
(a)it is a permanent interest bearing share, or
(b)it is of a description specified in regulations made by the Treasury for the purposes of this paragraph.
(6)Subsection (2) above applies for the purposes of subsection (4) above as it applies for the purposes of subsection (1)(b) above, treating the reference to a security as a reference to a share.
(7)Subject to subsections (9) and (10) below, for the purposes of this Act, a corporate bond—
(a)is a “qualifying” corporate bond if it is issued after 13th March 1984; and
(b)becomes a “qualifying” corporate bond if, having been issued on or before that date, it is acquired by any person after that date and that acquisition is not as a result of a disposal which is excluded for the purposes of this subsection, or which was excluded for the purposes of section 64(4) of the M2Finance Act 1984.
(8)Where a person disposes of a corporate bond which was issued on or before 13th March 1984 and, before the disposal, the bond had not become a qualifying corporate bond, the disposal is excluded for the purposes of subsection (7) above if, by virtue of any enactment—
(a)the disposal is treated for the purposes of this Act as one on which neither a gain nor a loss accrues to the person making the disposal; or
(b)the consideration for the disposal is treated for the purposes of this Act as reduced by an amount equal to the held-over gain on that disposal, as defined for the purposes of section 165 or 260.
(9)Subject to subsection (10) below, for the purposes of this Act—
(a)a corporate bond which falls within subsection (3)(a) above is a qualifying corporate bond, whatever the date of its issue;
(b)a corporate bond which falls within subsection (3)(b) above is a qualifying corporate bond as regards a disposal made after the time mentioned in paragraph 21(1)(c) of Schedule 11 to the 1989 Act, whatever the date of its issue;
(c)a corporate bond which falls within subsection (3)(c) above is a qualifying corporate bond as regards a disposal made after the time the agreement mentioned in paragraph 22(1)(b) of that Schedule is made, whatever the date of its issue;
(d)a corporate bond which falls within subsection (3)(d) above is a qualifying corporate bond as regards a disposal made after the time mentioned in paragraph 22A(1)(c) or 22B(2)(b) of that Schedule (as the case may be);
and subsections (7) and (8) above shall not apply in the case of any such bond.
(10)A security which is issued by a member of a group of companies to another member of the same group is not a qualifying corporate bond for the purposes of this Act except in relation to a disposal by a person who (at the time of the disposal) is not a member of the same group as the company which issued the security; and references in this subsection to a group of companies or to a member of a group shall be construed in accordance with section 170(2) to (14).
(11)For the purposes of this section—
(a)where a security is comprised in a letter of allotment or similar instrument and the right to the security thereby conferred remains provisional until accepted, the security shall not be treated as issued until there has been acceptance; and
(b)“” has the same meaning as in the M3Building Societies (Designated Capital Resources) (Permanent Interest Bearing Shares) Order 1991.
(12)The Treasury may by regulations provide that for the definition of the expression “” in subsection (11) above (as it has effect for the time being) there shall be substituted a different definition of that expression, and regulations under this subsection or subsection (5)(b) above may contain such supplementary, incidental, consequential or transitional provision as the Treasury thinks fit.
(13)This section shall have effect for the purposes of section 254 with the omission of subsections (4) to (6), (11) and (12).