Convertible securities

A company may have issued (or created in consequence of novation) a convertible or exchangeable security in a period of account beginning before 1 January 2005. Broadly, the previous tax treatment of the debtor relationship is ‘grandfathered’ – see CFM37700.

The security must meet the conditions in CTA09/S652 (CFM55420) – in particular, it must not be one to which the company became party in the course of a banking or security house trade. Where the conditions are met, CTA09/SCH2/PARA94 provides that

if the obligations under the security are met by transferring shares, the treatment given by CTA09/S653 (CFM55430) does not apply

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