Income Tax (Trading and Other Income) Act 2005 section 433

Meaning of "excluded indexed security"

Section 433 defines what an "excluded indexed security" is, a type of security whose redemption value is linked to chargeable assets or an index of such assets, and which falls outside the deeply discounted securities regime for income tax purposes.

• An excluded indexed security is one where the redemption amount is determined by applying the percentage change in the value of specified chargeable assets, or an index of those assets, over the security's life to its original issue price
• A minimum repayment guarantee of up to 10% of the issue price does not prevent a security from being an excluded indexed security, but a guarantee exceeding 10% does — meaning the investor must be at risk of losing at least 90% of their investment
• A chargeable asset is one whose disposal would give rise to a capital gains tax charge, so securities fully linked to such assets are taxed under the capital gains regime rather than the income tax regime
• General price indices such as the Retail Prices Index do not count as indices of chargeable asset values, so securities linked to general inflation remain within the deeply discounted securities rules

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