Chargeable gains aspects of convertible and exchangeable securities – the holder's perspective

Securities that may be converted into shares of the issuing company, or exchanged for shares in some other company, have features both of debt and equity. So it has always been seen as appropriate to tax the ‘debt-like’ features, such as interest, within an income regime, while retaining capital gains treatment for ‘share-linked’ aspects.

The tax treatment depends on (and has evolved as a result of) the accounting treatment. For details of the accounting treatment that is permissible under the different standards see CFM55215.

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