Section 401 — Corporation Tax Act 2009: Gilt strips

Gilt strips 401 1 This section applies if a loan relationship is represented by—

a a strip of a gilt-edged security, or b any other gilt-edged security.

2 Subsections (3) and (4) apply if a person exchanges a gilt-edged security for strips of that security.

3 The security is treated as having been redeemed at the time of the exchange by the payment to that person of its market value.

4 The person is treated as having acquired each strip for an amount equal to— A × B C where— A is the market value of the security at the time of the exchange, B is the market value of the strip at that time, and C is the total of the market values at that time of all the strips received in the exchange.

5 Subsections (6) and (7) apply if strips of a gilt-edged security are consolidated into a single gilt-edged security by being exchanged by any person for that security.

6 Each strip is treated as having been redeemed at the time of the exchange by the payment to that person of the amount equal to its market value.

7 The person is treated as having acquired the security for the amount equal to the total of the market values of all the strips given in the exchange.

8 For the meaning of “market value” and “ strip ” in relation to securities, see section 402 and section 403 respectively.