5A Exchange gains and losses

1

This paragraph applies where—

a

there is a transfer or redemption of a deep gain security, and

b

the person making the transfer or (as the case may be) the person who was entitled to the security immediately before redemption is a qualifying company.

2

For the purposes of paragraph 5 above the amount treated as income—

a

shall be increased by the amount of any non-trading exchange loss, or the aggregate of the amounts of any non-trading exchange losses, accruing to the company as regards the underlying right for any accrual period or periods constituting or falling within the holding period;

b

shall (after taking account of paragraph (a) above) be reduced by the amount of any non-trading exchange gain, or the aggregate of the amounts of any non-trading exchange gains, accruing to the company as regards the underlying right for any accrual period or periods constituting or falling within the holding period.

3

For the purposes of this paragraph—

a

the underlying right is the right to settlement under the debt on the security;

b

“accrual period” and “qualifying company” have the same meanings as in Chapter II of Part II of the Finance Act 1993;

c

the question whether a non-trading exchange gain or loss accrues to the company as regards the underlying right for an accrual period shall be decided in accordance with that Chapter.

4

For the purposes of this paragraph the holding period is the period which—

a

begins when the company acquired (or last acquired) the security before the transfer or redemption, and

b

ends when the transfer or redemption is made.