Income Tax (Trading and Other Income) Act 2005 section 434

Securities issued in separate tranches: preliminary

Section 434 introduces two special rules — the "basic rule" and the "nominal value rule" — for determining whether securities issued in tranches under a single prospectus qualify as deeply discounted securities.

• When securities are issued in separate tranches under the same prospectus, two rules determine whether they are treated as deeply discounted securities: the basic rule and the nominal value rule.
• If the original issue under the prospectus includes deeply discounted securities, the basic rule applies to all later tranches, and the nominal value rule is excluded entirely for all securities under that prospectus.
• If the original issue does not include any deeply discounted securities, the basic rule applies to later tranches unless the nominal value rule applies instead — meaning both rules may potentially come into play.
• The overall effect is that securities issued under the same prospectus are generally treated consistently: either all are deeply discounted securities or none of them is.

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