Corporation Tax Act 2009 section 406

Introduction to deeply discounted securities

Section 406 introduces the special corporation tax rules that apply to deeply discounted securities, particularly those issued by close companies, and defines key terms used in those rules.

• Sections 409 to 411 contain special rules for deeply discounted securities issued by close companies, and section 412 deals with persons indirectly standing in the position of creditor
• A "deeply discounted security" takes its meaning from the income tax rules in section 430 of ITTOIA 2005, which sets out when a security is considered to be issued at a deep discount
• The "discount" is defined as the difference between the price at which the security was issued and the amount that will be paid when it is redeemed
• The method for calculating whether the difference between issue price and redemption amount qualifies as a deep discount follows the same approach used in the income tax legislation