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HMRC internal manual

Employment Related Securities Manual

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HM Revenue & Customs
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Securities with Artificially Depressed Value

Convertible securities: charge on conversion

ITEPA03/S446H applies where the market value of the securities into which the convertible securities are converted is artificially low at the time of a chargeable event by virtue of ITEPA03/S439 (3)(a) – see ERSM40060.

The market value of the converted securities is artificially low where it has been reduced by at least 10% as a result of things done otherwise than for genuine commercial purposes within the period of 7 years ending with the chargeable event.

CMVCS in ITEPA03/S441 (6) (amount of gain realised by conversion) is increased by the amount of the depreciatory transaction – see ERSM40080.