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452D Conversion into corporate strips: lower level conversions

(1) For the purposes of this Chapter, section 452C also has effect in relation to each of the separate assets mentioned in subsection (1) of that section as if that separate asset were itself an interest-bearing corporate security (if that is not in fact the case).

(2) In subsection (1), the reference to section 452C includes a reference to that section as it has effect by virtue of this section.

(3) In the application of section 452C by virtue of this section, references to payments the right to which a separate asset represents or secures shall be construed in accordance with subsection (6) of that section.

(4) Where section 452C has effect by virtue of subsection (1)—

(a) any reference in this Chapter to converting an interest-bearing corporate security into corporate strips of the security shall be construed accordingly, and

(b) section 452E (meaning of “corporate strip”) has effect accordingly.

452E Meaning of “corporate strip” in Chapter 8

(1) In this Chapter “corporate strip” means any asset—

(a) which is, or has at any time been, one of the separate assets mentioned in section 452C(1), and

(b) which is not prevented from being a corporate strip by subsection (2) or (3).

(2) An asset is not a corporate strip if it—

(a) represents the right to, or

(b) secures,

payments of, or corresponding to, a part of every payment remaining to be made under an interest-bearing corporate security or a corporate strip.

(3) An asset is a corporate strip in the case of any person only if he acquired it—

(a) on or after 2nd December 2004, and

(b) otherwise than in pursuance of an agreement entered into before that date.

452F Corporate strips: acquisitions and disposals

(1) A person who converts an interest-bearing corporate security into corporate strips of the security is treated as having acquired each corporate strip by the payment of an amount equal to—

(2) If the converted corporate security is a deeply discounted security—

(a) its conversion into corporate strips is to be treated for the purposes of this Chapter as a transfer of the security, but

(b) the amount payable on the transfer is taken to be an amount equal to the acquisition cost of the converted corporate security.

(3) For the purposes of this Chapter—

(a) the consolidation of a corporate strip with other corporate strips into a single security is a disposal of the corporate strip by the person consolidating it (whether or not it would be apart from this subsection), and

(b) an amount equal to the market value of the corporate strip at the consolidation is treated as payable on the disposal.

(4) Section 438 (timing of transfers and acquisitions) does not apply to a conversion within subsection (1) or a consolidation within subsection (3).

(5) Subsections (1) to (3) apply instead of sections 440(4) (market value on general conversions of deeply discounted securities) and 441 (market value acquisitions).

(6) For the purposes of this section, the acquisition cost of the converted corporate security is the amount paid in respect of his acquisition of the security by the person who has it immediately before the conversion (no account being taken of any costs incurred in connection with that acquisition).

(7) References in this section to the market value of a security given or received in exchange for, or otherwise converted into, another are references to its market value at the time of the exchange or conversion.

452G Corporate strips: manipulation of acquisition, transfer or redemption payments

(1) This section applies if—

(a) as a result of any scheme or arrangement, an amount referred to in subsection (2)(a), (b) or (c) differs from the market value of the corporate strip in a way specified in that subsection, and

(b) the obtaining of a tax advantage by any person is the main benefit, or one of the main benefits, that might have been expected to accrue from, or from any provision of, the scheme or arrangement.

(2) The ways are that—

(a) the amount paid by a person in respect of the acquisition of the corporate strip is or was more than the market value of the corporate strip at the time of that acquisition,

(b) the amount payable to a person on transferring the corporate strip is less than the market value at the time of the transfer, or

(c) on redemption of the corporate strip the amount payable to a person, as the person holding the corporate strip, is less than the market value on the day before redemption.

(3) In a case within subsection (2)(a), for the purposes of section 439(1) on transferring the corporate strip the person is treated as if the person had paid to acquire the corporate strip an amount equal to the market value of the corporate strip at the time of the acquisition.

(4) In a case falling within subsection (2)(b), for those purposes the person is treated as if the amount payable to the person on the transfer were an amount equal to the market value of the corporate strip at the time of the transfer.

(5) In a case falling within subsection (2)(c), for those purposes the person is treated as if the amount payable to the person on redemption were an amount equal to the market value of the corporate strip on the day before redemption.

(6) The market value of a corporate strip at any time is to be determined for the purposes of this section without regard to any increase or diminution in the value of the corporate strip as a result of the scheme or arrangement mentioned in subsection (1).

(7) For the purposes of this section, no account is to be taken of any incidental expenses incurred in connection with any disposal or acquisition of a corporate strip.”.

(9) In Schedule 4 (abbreviations and defined expressions) in Part 2 (expressions defined in the Act or in ICTA) insert each of the following entries at the appropriate place—

(10) ITTOIA 2005 shall have effect as if it had been originally enacted with the amendments made by this paragraph.