Corporation Tax Act 2009 section 402

Market value of securities

Section 402 defines how market value is determined for gilt strips and other gilt-edged securities when they are exchanged, and gives the Treasury power to make regulations about valuation methods.

  • When a security is exchanged for another under section 401, its market value is taken at the time of the exchange.
  • The Treasury has the power to make regulations specifying how to determine the market value of any gilt strip or other gilt-edged security at any given time.
  • Such regulations may make different provision for different cases, allowing flexibility in how valuations are approached depending on the circumstances.
  • The regulations may also include incidental, supplemental, consequential and transitional provisions and savings.

Example

A company holds a gilt-edged security and decides to strip it into its individual interest and principal components. Under section 401, the company is treated as exchanging one security for several separate strips. Section 402 requires that the market value used for this deemed exchange is the value of each strip at the time the stripping takes place. If the Treasury has made regulations prescribing a specific method for valuing strips — for instance, by reference to published prices or a prescribed discount rate — the company must use that method to determine the market value of each strip it receives.

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