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HMRC internal manual

Corporate Finance Manual

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HM Revenue & Customs
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Old rules: asset-linked securities pre 2005: conditions: issue price and redemption amount

Identifying the issue price and redemption amount

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

Issue price

To satisfy FA96/S93 the terms of the loan had to show that the percentage change was applied to the full issue price - that is, without deducting issue costs. Where a company issued a further tranche of securities, for that tranche to comply with S93 the terms had to show that the percentage change was applied to the ‘clean’ price, that is, excluding any accrued interest.

Redemption amount

The application of the relevant percentage change might have resulted in a redemption amount that needed to be rounded. In the case of indexed gilts, the redemption amount was expressed ‘to four places of decimals rounded to the nearest figure below’. To qualify, a security had to follow that practice.

Changes in the index or chargeable asset

Where a security was linked to an index of chargeable assets, changes in the components of the index could be ignored so long as the index continued to reflect the population it was set up to mirror.

Where the link was to an individual asset - such as shares in one particular company - and that asset changed, or a new index was used, it might have been arguable that the new asset or index was not linked to the security from the time of the original loan. But the answer for any particular security might have depended on its specific terms of issue.