Section 119 | Transfers of securities subject to the accrued income scheme.

(1)Where there is a transfer of securities within the meaning of Chapter 2 of Part 12 of ITA 2007 (accrued income profits)—^F1

(a)if a payment is treated as made to the transferor under section 632 of that Act or by the transferor under section 633 of that Act, section 37 shall be disregarded in computing the gain accruing on the disposal concerned;^F1

(b)if a payment is treated as made by the transferee under section 632 of that Act or to the transferee under section 633 of that Act, section 39 shall be disregarded in computing the gain accruing to the transferee if he disposes of the securities;^F1

but subsections (2) and (3) below shall apply.

(2)Where the securities are transferred with accrued interest (within the meaning of that Chapter)—^F1

(a)if a payment is treated as made to the transferor under section 632 of ITA 2007, an amount equal to the amount of that payment shall be excluded from the consideration mentioned in subsection (8) below;^F1

(b)if a payment is treated as made by the transferee under that section, an amount equal to the amount of that payment shall be excluded from the sums mentioned in subsection (9) below.^F1

(3)Where the securities are transferred without accrued interest (within the meaning of that Chapter)—^F1

(a)if a payment is treated as made by the transferor under section 633 of ITA 2007, an amount equal to the amount of that payment shall be added to the consideration mentioned in subsection (8) below;^F1

(b)if a payment is treated as made to the transferee under that section, an amount equal to the amount of that payment shall be added to the sums mentioned in subsection (9) below.^F1

(3A)Subsections (3B) and (3C) below apply where there is a transfer of variable rate securities (within the meaning of that Chapter) and—^F1

(a)the transferor is treated as making accrued income profits under section 630(2) of ITA 2007, or^F1

(b)a payment is treated as made to the transferor under section 635 of that Act.^F1

(3B)Section 37 shall be disregarded in computing the gain accruing on the disposal concerned.^F1

(3C)An amount equal to the amount of the profits or payment shall be excluded from the consideration mentioned in subsection (8) below.^F1

(4)Where there is a transfer of securities with unrealised interest (within the meaning of Chapter 2 of Part 12 of ITA 2007)—^F1

(a)if section 630 of that Act applies or a payment is treated as made to the transferor under section 634 of that Act, section 37 shall be disregarded in computing the gain accruing on the disposal concerned, but the relevant amount shall be excluded from the consideration mentioned in subsection (8) below;^F1

(b)if section 681 of that Act applies, section 39 shall be disregarded in computing the gain accruing on the disposal concerned, but the relevant amount shall be excluded from the sums mentioned in subsection (9) below.^F1

(5)In subsection (4) above “the relevant amount” means an amount equal to—^F1

(a)if paragraph (b) below does not apply, the amount of the unrealised interest in question (within the meaning of Chapter 2 of Part 12 of ITA 2007);^F1

(b)if section 660 of that Act applies—^F1

(i)in a case falling within subsection (4)(a) above, the amount taken, by virtue of section 660 or 661 of that Act (as the case may be), to be the unrealised interest value for the purposes of section 660(2) or (3) of that Act;^F1

(ii)in a case falling within subsection (4)(b) above, the amount of income that is exempt from liability to income tax under section 681 of that Act.^F1

(6)In relation to any securities which by virtue of subsection (7) below are treated for the purposes of this subsection as having been transferred, subsections (2) and (3) above shall have effect as if for “is treated as made”, in each place where it occurs, there were substituted “would, if the disposal were a transfer, be treated as made”.^F2

(7)Where there is a disposal of securities for the purposes of this Act which is not a transfer (within the meaning of Chapter 2 of Part 12 of ITA 2007) but, if it were such a transfer, a payment would be treated as made under section 632 or 633 of that Act, the securities shall be treated—^F3

(a)for the purposes of subsection (6) above, as transferred on the day of the disposal, and^F3

(b)for the purposes of subsections (2) and (3) above, as transferred with accrued interest if, had the disposal been a transfer within the meaning of that Chapter, it would have been a transfer with accrued interest and as transferred without accrued interest if, had the disposal been such a transfer, it would have been a transfer without accrued interest.^F3

(7A)In relation to any securities which by virtue of subsection (7B) below are treated for the purposes of this subsection as having been transferred, subsection (3A) above shall have effect as if—^F3

(a)for “is treated as making” there were substituted “ would, if the disposal were a transfer, be treated as making ”, and^F3

(b)for “is treated as made” there were substituted “ would, if the disposal were a transfer, be treated as made ”.^F3

(7B)Where there is a disposal of securities for the purposes of this Act which is not a transfer (within the meaning of Chapter 2 of Part 12 of ITA 2007) but, if it were such a transfer, the transferor would be treated as making accrued income profits under section 630(2) of that Act in respect of a transfer of variable rate securities or a payment would be treated as made under section 635 of that Act—^F3

(a)the securities shall be treated, for the purposes of subsection (7A) above, as transferred on the day of the disposal, and^F3

(b)the transfer shall be treated, for the purposes of subsection (3A) above, as a transfer of variable rate securities.^F3

(8)The consideration is the consideration for the disposal of the securities transferred which is taken into account in the computation of the gain accruing on the disposal.

(9)The sums are the sums allowable to the transferee as a deduction from the consideration in the computation of the gain accruing to him if he disposes of the securities.

(10)Where on a conversion or exchange of securities a payment is treated as made to a person under section 632 or 635 of ITA 2007, or a person is treated as making accrued income profits under section 630(2) of that Act in respect of a transfer of variable rate securities, an amount equal to the amount of the payment or profits shall, for the purposes of this Act, be treated as follows—^F4F5

(a)to the extent that it does not exceed the amount of any consideration which the person receives (or is deemed to receive) or becomes entitled to receive on the conversion or exchange (other than his new holding), it shall be treated as reducing that consideration; and

(b)to the extent that it does exceed that amount, it shall be treated as consideration which the person gives on the conversion or exchange;

and where on a conversion or exchange of securities a payment is treated as made by a person under section 633 of that Act an amount equal to the amount of the payment shall, for the purposes of the computation of the gain, be treated as consideration which the person receives on the conversion or exchange.

(11)In subsection (10) above “conversion” means conversion within the meaning of section 132 and “exchange” means an exchange which by virtue of Chapter II of this Part does not involve a disposal.