Part 12Accrued income profits

Chapter 2Accrued income profits and losses

Further transactions treated as transfers

649New securities issued with extra return

1

This section applies if—

a

securities (“old securities”) of a particular kind are issued by way of an original issue of securities of that kind,

b

on a later occasion securities (“new securities”) of the same kind are issued,

c

a sum (“the extra return”) is payable in respect of the new securities by the issuer of them to reflect the fact that interest is accruing on the old securities,

d

the issue price of the new securities includes an element (whether or not separately identified) representing payment for the extra return, and

e

the extra return is equal to the amount of interest mentioned in subsection (2).

2

The amount of interest referred to in subsection (1)(e) is—

a

the amount of interest payable for the relevant period on so many old securities as there are new, or

b

if there are more new securities than old, the amount of interest which would be so payable if there were as many old securities as new.

3

This section does not apply if the new securities are variable rate securities.

4

The new securities are treated as transferred with accrued interest to the person to whom they are issued on the new issue day.

5

But no one is treated as the transferor.

6

For the purposes of this Chapter, the settlement day for the transfer is taken to be the new issue day.

7

See section 662 for the amount of the payment treated as made in the case of the transfer.

8

In this section—

  • “the relevant period” is the period beginning with the day after—

    1. a

      the only or last interest payment day before the new issue day, or

    2. b

      if there is no interest payment day before the new issue day, the day on which the old securities are issued,

    and ending with the new issue day, and

  • “the new issue day” is the day on which the new securities are issued.