Statutory Instruments 1998 No. 3177

Statutory Instruments 1998 No. 3177
The European Single Currency (Taxes) Regulations 1998 - continued

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 -

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

C - D

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 -

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.

PART IV
AGREEMENTS FOR SALE AND REPURCHASE OF SECURITIES
Interpretation
13. In this Part of these Regulations -

"capital payment" means any payment on the euroconversion of securities other than any interest, dividend or other annual payment payable in respect of the securities;

"original owner" and "interim holder" shall be construed in accordance with section 730A(1)[

Replacement of securities in a euroconversion
14. - (1) This regulation applies in a case where -

(a) there is an agreement for the sale of securities, and

(b) there is a euroconversion of the securities to which the agreement relates ("the old securities"), effected wholly or in part by the issue of new securities to replace them.

    (2) The new securities which replace the old securities shall be regarded for the purposes of sections 727A(1), 730A(1) and 737A(1) of the Taxes Act, and section 263A(1)[15] of the 1992 Act, as similar securities in relation to the old securities.

    (3) In paragraph (2) the reference to similar securities shall be construed in accordance with section 727A(4), 730B(4) or 737B(6), as the case may be.

Payment or benefit received by interim holder on euroconversion
     15. - (1) This regulation applies in a case where -

(a) there is an arrangement for the sale and repurchase of securities to which section 263A(1) of the 1992 Act applies,

(b) a capital payment, but for the arrangement, would be received by the original owner on the euroconversion of those securities,

(c) the interim holder is not required under the arrangement to pay to the original owner an amount representative of that capital payment, and an amount representative of that capital payment is not required under the arrangement to be taken into account in computing the repurchase price of the securities, and

(d) the amount of the capital payment would not exceed 500 euros.

(2) The interim holder shall not be regarded, for the purposes of section 263A of the 1992 Act, as receiving a benefit under subsection (3)(b) of that section equal to the amount of the capital payment.

Payment deemed to be made by interim holder on euroconversion
16. - (1) This regulation applies in a case where -

(a) there is an arrangement for the sale and repurchase of securities to which section 730A(1) of the Taxes Act, or section 263A(1) of the 1992 Act, applies, or to which section 730A(1) of the Taxes Act would apply if the sale price and the repurchase price were different,

(b) there is a euroconversion of those securities prior to their being repurchased, and

(c) it is reasonable to assume that an amount that is representative of a capital payment in respect of the euroconversion is taken into account in computing the repurchase price of those securities.

    (2) The amount referred to in paragraph (1)(c) shall be treated as if it were a separate representative payment in respect of the euroconversion made by the interim holder to the person required or entitled under the arrangement to repurchase the securities.

    (3) The repurchase price of the securities shall be treated, for the purposes of section 730A of the Taxes Act and the 1992 Act, as increased by an amount equal to the amount of the separate payment treated as made by paragraph (2).

Renominalisation resulting in new minimum denomination in which securities can be held or traded
     17. - (1) This regulation applies in a case where -

(a) there is an arrangement for the sale and repurchase of securities to which section 730A(1) or 737A(1) of the Taxes Act, or section 263A(1) of the 1992 Act, applies, or to which section 730A(1) of the Taxes Act would apply if the sale price and the repurchase price were different,

(b) there is a euroconversion of those securities prior to their being repurchased,

(c) the aggregate nominal value (expressed in euros) of the securities sold, or of securities issued to replace them in a euroconversion is, as a result of renominalisation, not a whole multiple of the new minimum denomination in which those securities can be traded at the time of repurchase under the arrangement,

(d) securities the aggregate nominal value of which is equal to the largest whole multiple of the new minimum denomination which does not exceed the aggregate nominal value referred to in sub-paragraph (c) are required under the arrangement to be sold back to the original owner or the transferor or a person connected with him, and

(e) the interim holder is required under the arrangement to pay to the original owner or transferor, or person connected with him, an amount which either -

    (2) Where this regulation applies, the requirement for payment of the amount specified in paragraph (1)(e) is to to be regarded for the purposes of sections 727A, 730A and 737A of the Taxes Act, and section 263A of the 1992 Act, as equivalent to a requirement on the original owner, transferor or person connected with him to repurchase the remainder of the securities.

    (3) The value referred to in paragraph (1)(e)(ii) is the appropriate proportion (based on nominal value) of the market value of the minimum amount of the original securities that, at the time of the repurchase of the securities pursuant to the arrangement, could be traded.

    (4) Where the amount calculated in accordance with sub-paragraph (e) of paragraph (1) does not exceed 500 euros, and the arrangement does not require payment of a sum equal to this amount, this regulation shall have effect as if the amount calculated in accordance with that sub-paragraph were nil and the requirement specified in that sub-paragraph were satisfied.

    (5) Where, in a case to which paragraph (1)(a) to (d) applies -

(a) no amount is paid as mentioned in paragraph (1)(e) by the interim holder to the original owner, transferor or person connected with him in respect of securities that, as a result of the renominalisation, could not be traded, but

(b) it is reasonable to assume that an amount that is representative of an amount that could have been paid as mentioned in sub-paragraph (a) was taken into account in computing the repurchase price of the securities,

that amount shall be treated as if it were a separate payment made by the interim holder to the original owner, transferor or person connected with him that is representative of a capital payment on the euroconversion of the securities, and the repurchase price of the securities shall be treated as increased by an amount equal to the amount of that separate payment so treated as made.

Payment made or deemed to be made by interim holder in respect of euroconversion - chargeable gains consequences
18. - (1) This regulation applies in a case where -

(a) there is an arrangement for the sale and repurchase of securities to which section 263A(1) of the 1992 Act applies, and

(b) as a result of a euroconversion of those securities, a payment representative of a capital payment is made, or treated under regulation 16(2) or 17(5) as made ("deemed payment"), by the interim holder to the original owner or the transferor or a person connected with him.

(2) The payment or deemed payment shall be treated, for the purposes of the 1992 Act -

(a) where the original owner and the repurchaser are the same person, as a capital payment received by the original owner in respect of the euroconversion of the securities concerned on such date as, on a just and reasonable view, may be inferred from the terms of the arrangement to be the date when the original owner would, but for the arrangement, have received a capital payment in respect of which the payment or deemed payment is made;

(b) where the original owner and the repurchaser are not the same person and so far as concerns persons other than the interim holder, as reducing the repurchase price; and

(c) as deductible by the interim holder in computing any capital gain arising -

Euroconversion - loan relationships consequences
19. - (1) Paragraph 15 of Schedule 9 to the Finance Act 1996 (loan relationships - repo transactions and stock-lending) shall have effect as if the definition of "repo or stock-lending arrangements" in sub-paragraph (3) of that paragraph also included provision under an agreement or series of agreements for the original owner, or a person connected with him, subsequently to be or become entitled, or required, to have transferred to him either -

(a) the rights accruing on a euroconversion of the loan relationship, or

(b) where the rights include a payment on the euroconversion, other than interest, of an amount which, when aggregated with all other payments on the euroconversion of loan relationships with equivalent rights which are the subject of the same repo or stock-lending arrangement, results in an aggregate amount that does not exceed 500 euros, either the whole of those rights or the whole of those rights apart from that payment.

(2) In paragraph (1)(b) "equivalent rights" shall be construed in accordance with paragraph 15(4) of Schedule 9 to the Finance Act 1996.

PART V
STOCK LENDING ARRANGEMENTS
Interpretation
20. In this Part of these Regulations -

"capital payment" means any payment on the euroconversion of securities other than any interest, dividend or other annual payment payable in respect of the securities;

"stock lending arrangement", "borrower" and "lender" have the meanings given by section 263B(1)[

Deemed capital payment
21. - (1) This regulation applies in a case where -

(a) there is a stock lending arrangement in relation to securities,

(b) a capital payment resulting from the euroconversion of those securities would, but for the arrangement, be received by the lender, and

(c) the stock lending arrangement does not include a requirement for the borrower to make a payment to the lender that is representative of the capital payment referred to in sub-paragraph (b).

(2) Subject to paragraph (3), the lender shall be treated, for all purposes of the Taxes Acts, as having received a capital payment in respect of the euroconversion of the securities concerned -

(a) on such date as it is reasonable to assume would have been, but for the arrangement, the first date on which the lender could have received the payment mentioned in paragraph (1)(b), and

(b) in an amount equal to the amount of the payment he could have received.

(3) Paragraph (2) shall not apply where the amount of the capital payment that the lender could have received is less than 500 euros.

Renominalisation resulting in new minimum amount in which securities can be held or traded
22. - (1) This regulation applies in a case where -

(a) there is a stock lending arrangement in relation to securities,

(b) there is a euroconversion of those securities prior to their being transferred back to the lender under the arrangement,

(c) the aggregate nominal value (expressed in euros) of the securities transferred to the borrower under the arrangement, or of the securities issued to replace them in the euroconversion, is, as a result of renominalisation, not a whole multiple of the new minimum denomination in which those securities can be traded at the time of the transfer of securities back to the lender under the arrangement,

(d) securities the aggregate nominal value of which is equal to the largest whole multiple of the new minimum denomination which does not exceed the aggregate nominal value referred to in sub-paragraph (c) are transferred back to the lender pursuant to the arrangement, and

(e) the borrower is required under the arrangement to pay to the lender an amount which either -

    (2) Where this regulation applies, the requirement for payment of the amount specified in paragraph (1)(e) is to be regarded for the purposes of section 263B of the 1992 Act as a requirement on the part of the borrower to transfer the remainder of the securities back to the lender.

    (3) The value referred to in paragraph (1)(e)(ii) is the appropriate proportion (based on nominal value) of the market value of the minimum amount of the original securities that, at the time of the transfer back of securities to the lender under the arrangement, could be traded.

    (4) Where the value, or proceeds of disposal, of the remainder of the securities referred to in sub-paragraph (e) of paragraph (1) does not exceed 500 euros, and the arrangement does not require payment of a sum equal to this amount, this regulation shall have effect as if the amount calculated in accordance with that sub-paragraph were nil and the requirement specified in that sub-paragraph were satisfied.

Payment made by borrower to lender in respect of euroconversion - chargeable gains consequences
     23. - (1) This regulation applies in a case where -

(a) there is a stock lending arrangement in relation to securities, and

(b) a payment representative of a capital payment resulting from a euroconversion of those securities is made by the borrower to the lender.

(2) The representative payment shall be treated, for all purposes of the Taxes Acts -

(a) as a capital payment received by the lender in respect of the euroconversion of the securities concerned on such date as it is reasonable to assume would have been, but for the arrangement, the first date on which the lender could have received the capital payment, and

(b) as deductible by the borrower in computing any capital gain arising -

PART VI
REPURCHASES AND STOCK LENDING - STAMP DUTY AND STAMP DUTY RESERVE TAX
Interpretation
24. In this Part of these Regulations "capital payment" means any payment on the euroconversion of securities other than any interest, dividend or other annual payment payable in respect of the securities.

Replacement of stock in a euroconversion
25. - (1) This regulation applies in a case where -

(a) there is an arrangement involving the transfer of stock to which subsection (1)(a) of section 80C of the Finance Act 1986[

(2) The new stock shall be regarded, for the purposes of section 80C of the Finance Act 1986, as stock of the same kind and amount as the old stock.

Replacement of chargeable securities in a euroconversion
26. - (1) This regulation applies in a case where -

(a) there is an arrangement involving the transfer of chargeable securities to which subsection (1)(a) of section 89AA of the Finance Act 1986[

(2) The new chargeable securities shall be regarded, for the purposes of section 89AA of the Finance Act 1986, as chargeable securities of the same kind and amount as the old chargeable securities.

Payment or benefit received by transferee of stock on euroconversion
27. - (1) This regulation applies in a case where -

(a) there is an arrangement involving the transfer of stock to which subsection (1) of section 80C of the Finance Act 1986 applies,

(b) a capital payment would, but for the arrangement, be received by the person referred to as B in that section or by his nominee on the euroconversion of that stock,

(c) neither the person referred to as A in that section nor his nominee is required under the arrangement to pay to B or to B's nominee an amount equivalent to the amount of that capital payment, and an amount equivalent to the amount of that capital payment is not required under the arrangement to be taken into account in computing the price of stock to be transferred to B or his nominee under the arrangement, and

(d) the amount of the capital payment would not exceed 500 euros.

(2) A shall not be regarded, for the purposes of section 80C of the Finance Act 1986, as a person to whom a benefit consisting of an amount equal to the capital payment referred to in paragraph (1) accrues as mentioned in subsection (4)(b) of that section.

Payment or benefit received by transferee of chargeable securities on euroconversion
28. - (1) This regulation applies in a case where -

(a) there is an arrangement involving the transfer of chargeable securities to which subsection (1) of section 89AA of the Finance Act 1986 applies,

(b) a capital payment would, but for the arrangement, be received by the person referred to as Q in that section or by his nominee on the euroconversion of those chargeable securities,

(c) neither the person referred to as P in that section nor his nominee is required under the arrangement to pay to Q or to Q's nominee an amount equivalent to the amount of that capital payment, and an amount equivalent to the amount of that capital payment is not required under the arrangement to be taken into account in computing the price of the chargeable securities to be transferred to Q or his nominee under the arrangement, and

(d) the amount of the capital payment would not exceed 500 euros.

(2) P shall not be regarded, for the purposes of section 89AA of the Finance Act 1986, as a person to whom a benefit consisting of an amount equal to the capital payment referred to in paragraph (1) accrues as mentioned in subsection (4)(b) of that section.

Renominalisation resulting in new minimum denomination in which stock can be held or traded
29. - (1) This regulation applies in a case where -

(a) there is an arrangement involving the transfer of stock to which subsection (1) of section 80C of the Finance Act 1986 applies,

(b) there is a euroconversion of that stock prior to the transfer of stock under the arrangement by A or his nominee to B or his nominee as mentioned in subsection (1)(b) of that section,

(c) the aggregate nominal value (expressed in euros) of the stock transferred by B to A or his nominee as mentioned in subsection (1)(a) of that section, or of stock issued to replace that stock in a euroconversion is, as a result of renominalisation, not a whole multiple of the new minimum denomination in which that stock can be traded at the time of the transfer of stock referred to in sub-paragraph (b),

(d) stock the aggregate nominal value of which is equal to the largest whole multiple of the new minimum denomination which does not exceed the aggregate nominal value referred to in sub-paragraph (c) is required under the arrangement to be transferred by A or his nominee to B or his nominee, and

(e) A or his nominee is required under the arrangement to pay to B or his nominee an amount which either -

    (2) Where this regulation applies, the requirement for payment of the amount specified in paragraph (1)(e) is to be regarded, for the purposes of section 80C of the Finance Act 1986, as equivalent to a requirement for the remainder of the stock to be transferred by A or his nominee to B or his nominee.

    (3) The value referred to in paragraph (1)(e)(ii) is the appropriate proportion (based on nominal value) of the market value of the minimum amount of the original stock that, at the time of the transfer of stock referred to in sub-paragraph (b), could be traded.

    (4) Where the amount calculated in accordance with sub-paragraph (e) of paragraph (1) does not exceed 500 euros, and the arrangement does not require payment of a sum equal to this amount, this regulation shall have effect as if the amount calculated in accordance with that sub-paragraph were nil and the requirement specified in that sub-paragraph were satisfied.

Notes:

[13] Sections 730A and 730B were inserted by section 80(1) of the Finance Act 1995.back

[14] Section 727A was inserted by section 79(1) of the Finance Act 1995, and sections 737A to 737C were inserted by section 122 of the Finance Act 1994.back

[15] Section 263A was inserted by section 80(4) of the Finance Act 1995.back

[16] Section 263B was inserted by paragraph 5(1) of Schedule 10 to the Finance Act 1997 (c. 16).back

[17] 1986 c. 41. Section 80C was inserted by section 98(1) of the Finance Act 1997 and repealed by Part VII of Schedule 18 to that Act with effect from the day to be appointed under section 111 of the Finance Act 1990.back

[18] Section 89AA was inserted by section 103(1) of the Finance Act 1997 and repealed by Part VII of Schedule 18 to that Act with effect from the day to be appointed under section 111 of the Finance Act 1990.back



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Prepared 27 January 1999