The European Single Currency (Taxes) Regulations 1998

Exchange or conversion of relevant discounted securities

12.—(1) A euroconversion of relevant discounted securities that is effected solely by means of an exchange or conversion of those securities shall be treated as not constituting either—

(a) a transfer of those securities within the meaning of paragraph 4 of Schedule 13 to the Finance Act 1996 (“Schedule 13”), or

(b) a conversion of those securities for the purposes of paragraph 5 of Schedule 13.

(2) The relevant discounted securities (“the new securities”) resulting from the exchange or conversion referred to in paragraph (1) shall be deemed for the purposes of Schedule 13 to have been acquired for the amount resulting from the formula—

A - B

where—

• A is the amount equal to the acquisition cost of the relevant discounted securities replaced by the new securities, and

• B is the amount of any cash payment received by a person in respect of the euroconversion, to the extent that that amount does not exceed A.

(3) Where a cash payment is received by a person in respect of relevant discounted securities as a result of a euroconversion of those securities which—

(a) involves a simple redenomination of those securities, accompanied by either or both of renominalisation and reconventioning as a consequence of that simple redenomination, and

(b) is effected otherwise than by means of—

(i) a transfer of those securities, or

(ii) an exchange or conversion of those securities,

those securities shall be deemed for the purposes of Schedule 13 to have been acquired for the amount resulting from the formula—

C - D

where—

• C is the amount equal to the acquisition cost of the relevant discounted securities, and

• D is the amount of the cash payment received, to the extent that that amount does not exceed C.

(4) Where—

(a) the amount of the cash payment referred to in the description of B in paragraph (2) exceeds the amount referred to in the description of A in that paragraph, or

(b) the amount of the cash payment referred to in the description of D in paragraph (3) exceeds the amount referred to in the description of C in that paragraph,

an amount equal to the excess in either case shall constitute a profit realised by a person from the discount on a relevant discounted security for the purposes of paragraph 1 of Schedule 13 (charge to tax on realised profit comprised in discount).

(5) In this regulation “relevant discounted security” has the meaning given by paragraph 3 of Schedule 13.