Income Tax (Trading and Other Income) Act 2005 section 430

Meaning of "deeply discounted security"

Section 430 defines what counts as a "deeply discounted security" for income tax purposes, by comparing the amount payable on redemption with the issue price using a statutory formula.

• A security is "deeply discounted" if the amount payable on redemption exceeds the issue price by more than 0.5% of the redemption amount for each year of the security's life, subject to a 30-year cap
• Where the redemption period is not a whole number of years, incomplete years are broken into twelfths, with each complete month and any remaining part-month counting as one-twelfth
• Any interest payable on redemption is excluded when calculating whether the discount threshold is breached
• The general rule is subject to several exceptions, including excluded redemption occasions, securities that are specifically not deeply discounted, securities issued in separate tranches, and strips of government or corporate securities