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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
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Old rules: asset-linked securities pre 2005: ceasing to be qualify

Introduction to S93B

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

A security may have satisfied the conditions of FA96/S93, but at a later date, while still in the same ownership, ceased to - for example because it became trading stock, or the linked asset was shares and the shares ceased to qualify. FA96/S93B may also have applied to securities held on 26 July 2001 that no longer qualified after that date, perhaps because FA96/S93A then applies or the terms of the security meant that the linked asset was no longer within S93.
Any chargeable gain was calculated up to the date of the change of status, but was held over until the disposal of the security.

Deemed disposal and acquisition

FA96/S93B applied when a security no longer fell within FA96/S93. On that date, the company was deemed to have disposed of the security for the relevant consideration and re-acquired it for the same amount immediately afterwards.

Relevant consideration

This was the value at which the asset would be carried in the accounts if it had been accounted for at all times in accordance with the authorised accounting method that would be adopted after the re- acquisition. It was not simply the market value at that time, a fairly common misapprehension.

Where a security fell out of S93 because it became trading stock, the company would have been using an authorised accruals method before the deemed disposal. After the deemed disposal it could be using the mark to market basis. If so, the security would be valued using the mark to market basis, i.e. the company would bring in fair value.

The relevant consideration was reduced by any of the amount representing interest accrued but not yet paid or payable.