[CFM55280] Holders of convertible or share-linked securities: events treated as disposal of security: examples
Conversion option exercised but cash-settled by issuer
In the example in CFM55260, suppose that on Abacus opting to convert, the terms of the security had allowed the issuer to cash settle for the value of the shares, which was £1.1million, instead of issuing shares. TCGA92/S132 would not then apply, and TCGA92 would treat the transaction as involving a disposal of the security.
CTA09/S670(3) provides for the base cost of the convertible security to be treated as increased (or reduced) by the same aggregate amounts as in the CFM55270 example. So no chargeable gain would arise from the disposal of the security unless the cash settlement amount had exceeded £1.1million.