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HMRC internal manual

Savings and Investment Manual

Deeply discounted securities: taxation: market value rules

Market value rules


ITTOIA05/S440 provides that the following transfers are deemed to be disposals made at market value. These are transfers:

  • other than at arm’s length
  • between connected persons
  • for consideration not wholly in money or money’s worth
  • on death
  • by a personal representative to a legatee.

Where deeply discounted securities are converted into shares or other securities, the disposal value is the market value of those shares or other securities. This is subject to special rules for gilt strips (SAIM3130) and corporate strips (SAIM3150).


ITTOIA05/S441 provides that a person acquiring a deeply discounted security to which section 440 has applied is treated as doing so for a payment equal to the market value of the securities.

Meaning of market value

Market value takes its meaning from TCGA92/272 to 274. There is a different definition of market value for the rules that apply to ‘strips’.