When convertible securities are first acquired, liabilities to tax as employment income can arise under

Chapter 1 of Part 3 (earnings)

Chapter 10 of Part 3 (taxable benefits: residual liability to charge)

Chapter 5 of Part 7 (options to acquire securities)

In each case, the market value of the securities acquired is the value of the securities at that time, determined as if they were not convertible. So, in valuing them, the value of the right to convert must be ignored (ITEPA03/S437(1)).


Company loan stock of nominal value £100 carrying interest at 4% converts into 10 ordinary shares in three years time.

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