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HMRC internal manual

Capital Gains Manual

Deep discount securities: introduction

ICTA88/S57 and ICTA88/SCH4 introduced new rules for dealing with the Income Tax treatmentof securities issued at a deep discount by companies after 13 March 1984. A similar chargewill arise on the disposal, on or after 14 March 1989, of securities issued by publicbodies. The investor is treated as having received an amount of accrued income which istaxable under Case III or Case IV when the security matures or is disposed of. For CapitalGains Tax purposes the computation on the disposal or maturity is adjusted to exclude theamount of the accrued income, TCGA92/S118.

The deep discount regime was replaced by a new taxation regime for debts in FA96.ICTA88/S57 and ICTA88/SCH4 were repealed with effect from 1 April 1996 for Corporation Taxpurposes, see CG54000+, and from 6 April 1996 for Income Tax purposes, see CG54200+. Theadvice in CG54601+ will not apply from these dates.