Income Tax Act 2007

Conversion of shares etc and company reorganisations U.K.

329 Conversion of convertible shares and securities U.K.

(1) This section applies if—

(a) shares have been issued to a company (“the investing company”) by the exercise by it of any right of conversion attached to other shares or securities held by it (“the convertibles”),

(b) the shares so issued are in the same company as the convertibles to which the right was attached,

(c) the convertibles to which the right was attached were first issued to the investing company and were held by it from the time they were issued until converted, and

(d) the right was attached to the convertibles when they were first so issued and was not varied before it was exercised.

(2) If this section applies, subsections (3) and (4) have effect to determine the extent to which, and the times for which, the requirements of the following provisions of Chapter 4 are met in relation to the shares issued to the investing company by the exercise by it of the right of conversion—

• section 287 (the maximum qualifying investment requirement),

• section 289 (the proportion of eligible shares requirement),

• section 291 (the carrying on of a qualifying activity requirement),

• section 293 (the use of the money raised requirement),

• section 294 (the relevant company to carry on the relevant qualifying activity requirement), and

• section 297 (the gross assets requirement).

(3) Subsections (3) to (6) of section 327 apply in relation to the exchange of convertibles for shares by virtue of the exercise of the right of conversion as if—

(a) that exchange were an exchange, under any arrangements to which that section applies, of new shares for old shares, and

(b) the references in those subsections and section 328(5)(b) to the arrangements were references to the provision conferring the right of conversion.

(4) For the purposes of section 289 the value of the new shares immediately after the time of their acquisition by the investing company is to be taken as the same as the value, when last valued in accordance with that section, of the convertibles for which they are exchanged.

330 Power to facilitate company reorganisations etc involving exchange of shares U.K.

(1) The Treasury may by regulations make provision for cases where—

(a) a holding of shares or securities that meets the requirements of Chapter 4 is exchanged for other shares or securities,

(b) the exchange is made for genuine commercial reasons and does not form part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax, and

(c) the new shares or securities do not meet some or all of the requirements of Chapter 4,

providing that the new shares or securities are to be treated as meeting those requirements.

(2) The references in subsection (1) to an exchange of shares or securities include any form of company reorganisation or other arrangement which involves a holder of shares in or securities of a company receiving other shares or securities—

(a) whether the original shares or securities are transferred, cancelled or retained, and

(b) whether the new shares or securities are in or of the same or another company.

(3) The regulations must specify—

(a) the cases in which, and conditions subject to which, they apply,

(b) which requirements of Chapter 4 are to be treated as met, and

(c) the period for which those requirements are to be treated as met.

(4) The regulations may contain such administrative provisions (including provision for advance clearances) as appear to the Treasury to be necessary or appropriate.

(5) The regulations may authorise the Commissioners for Her Majesty's Revenue and Customs to give notice to any person requiring that person to provide such information, specified in the notice, as they may reasonably require in order to determine whether any conditions imposed by the regulations are met.

(6) Regulations under this section —

(a) may make different provision for different cases,

(b) may contain incidental, supplemental, consequential and transitional provision and savings, and

(c) may include provision having retrospective effect.