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HMRC internal manual

Corporate Finance Manual

Old rules: convertibles pre 2005: return on the security

Return on a convertible security

This guidance applies to periods of account beginning before 1 January 2005

Any return on the security that came in addition to the shares had to satisfy both of two conditions.

  Condition Guidance Old legislation
1 The security was not a relevant discounted security or an excluded indexed security and CFM82250 S92(1)(d)
2 the terms didn’t require the holder to sell the security to another person for an amount equivalent to a deep gain. CFM82260 S92(1)(dd)

The main aim of those conditions was to ensure returns that were in the form of a discount came within loan relationships, not chargeable gains.