Office of Public Sector Information
SCHEDULE 10 continued PART II continued
22 In a case where—
(a) paragraph 12 above would apply (apart from this paragraph) in the case of a transfer or redemption of a security, and
(b) immediately before the transfer or redemption was made the security was held for the purposes of an exempt approved scheme (within the meaning of Chapter I of Part XIV of the Taxes Act 1988),
that paragraph shall not apply in the case of the transfer or redemption.
23 In a case where—
(a) a security is the subject of a transfer which falls within section 129(3) of the Taxes Act 1988, and
(b) paragraph 12 above would apply in the case of the transfer (apart from this paragraph),
that paragraph shall not apply in the case of the transfer.
24 Section 88 of the [1982 c. 39.] Finance Act 1982 shall apply to the identification, for the purposes of this Part of this Schedule, of qualifying convertible securities transferred or redeemed as it applies to the identification, for the purposes of capital gains tax, of deep discount securities disposed of.
25 (1) In a case where—
(a) a qualifying convertible security is redeemed, and
(b) the circumstances are such that paragraph 12 above applies in the case of the redemption,
sub-paragraph (2) below shall apply in relation to the company which issued the security.
(2) For the purposes of sections 338 and 494 of the Taxes Act 1988 (allowance of charges on income) the relevant amount shall be treated as if it were interest—
(a) falling within section 338(3)(b), and
(b) paid by the company in the accounting period in which the redemption occurs (and not as mentioned in the words of section 338(3) which follow paragraph (b)).
(3) In this paragraph “the relevant amount” means so much of the amount paid on the redemption as exceeds the issue price of the security.
26 (1) Schedule 4 to the Taxes Act 1988 (deep discount securities) shall be amended as follows.
(2) In paragraph 1 (interpretation) the following sub-paragraph shall be inserted after sub-paragraph (1)—
“(1A) Notwithstanding anything in sub-paragraph (1) above, for the purposes of this Schedule a security is not a deep discount security if—
(a) it was issued by a company on or after 1st August 1990, and
(b) under the terms of issue it can be converted into share capital in a company (whether or not the company is the one which issued the security).”
(3) The following shall be inserted after paragraph 20—
21 In a case where—
(a) a security is a qualifying convertible security, for the purposes of Schedule 10 to the Finance Act 1990, at the time of its issue, and
(b) apart from this paragraph it would be a deep discount security at that time,
the security shall be treated, at the time of its issue and at all subsequent times, as not being a deep discount security.”
27 (1) Schedule 11 to the [1989 c. 26.] Finance Act 1989 (deep gain securities) shall be amended as follows.
(2) In paragraph 4 (meaning of transfer etc.) the following sub-paragraph shall be inserted after sub-paragraph (2)—
“(2A) But (notwithstanding sub-paragraph (2) above) “transfer” does not include a transfer made on a conversion of a security into share capital in a company.”
(3) The following shall be inserted after paragraph 22—
22A (1) Sub-paragraph (2) below applies where—
(a) a security is a qualifying convertible security, for the purposes of Schedule 10 to the Finance Act 1990, at the time of its issue,
(b) apart from paragraph 21 of Schedule 4 to the Taxes Act 1988, it would be a deep discount security at that time, and
(c) at a later time it ceases to be a qualifying convertible security for the purposes of Schedule 10 to the Finance Act 1990.
(2) As regards any event occurring in relation to the security after the time mentioned in sub-paragraph (1)(c) above, paragraphs 5 to 19 above shall have effect as if—
(a) the security were a deep gain security, and
(b) it had been acquired as such (whatever the time it was acquired).
(3) For the purposes of sub-paragraph (2) above events, in relation to a security, include anything constituting a transfer or acquisition for the purposes of this Schedule.
22B (1) In a case where—
(a) a security is a qualifying convertible security, for the purposes of Schedule 10 to the Finance Act 1990, at the time of its issue, and
(b) apart from this sub-paragraph it would be a deep gain security at that time,
then (subject to sub-paragraph (3) below) the security shall be treated, at the time of its issue and at all subsequent times, as not being a deep gain security.
(2) Sub-paragraph (3) below applies where—
(a) sub-paragraph (1) above applies in the case of a security, and
(b) at a time after its issue it ceases to be a qualifying convertible security for the purposes of Schedule 10 to the Finance Act 1990.
(3) As regards any event occurring in relation to the security after the time mentioned in sub-paragraph (2)(b) above, paragraphs 5 to 19 above shall have effect as if—
(a) the security were a deep gain security, and
(b) it had been acquired as such (whatever the time it was acquired).
(4) For the purposes of sub-paragraph (3) above events, in relation to a security, include anything constituting a transfer or acquisition for the purposes of this Schedule.”
28 (1) Section 64 of the [1984 c. 43.] Finance Act 1984 (qualifying corporate bonds) shall be amended as follows.
(2) The following subsection shall be inserted after subsection (3C)—
“(3D) For the purposes of this section “corporate bond” also includes a security—
(a) which is not included in the definition in subsection (2) above, and
(b) which, by virtue of paragraph 22A(2) or 22B(3) of Schedule 11 to the [1989 c. 26.] Finance Act 1989, falls to be treated as a deep gain security as mentioned in the paragraph concerned.”
(3) The following subsection shall be inserted after subsection (5C)—
“(5D) Subject to subsection (6) below, for the purposes of this section and Schedule 13 to this Act a corporate bond which falls within subsection (3D) above is a qualifying corporate bond as regards a disposal made after the time mentioned in paragraph 22A(1)(c) or 22B(2)(b) (as the case may be) of Schedule 11 to the Finance Act 1989.”
29 (1) The amendment made by paragraph 27(2) above shall be deemed always to have had effect.
(2) Paragraph 28 above shall have effect in relation to disposals after the relevant time (and, in relation to such disposals, shall be regarded as always having had effect).
(3) In sub-paragraph (2) above “the relevant time” means the time referred to, as regards the security concerned, in section 64(5D) of the [1984 c. 43.] Finance Act 1984.
(4) Subject to sub-paragraphs (1) to (3) above, this Schedule shall be deemed to have come into force on 9th June 1989.
Finance Act 1990