Income Tax (Trading and Other Income) Act 2005 section 441

Market value acquisitions

Section 441 establishes when a person acquiring a deeply discounted security must use market value as their acquisition cost for tax purposes, rather than any actual amount paid.

• When a deeply discounted security is acquired through certain specified transactions, the acquirer is treated as having paid an amount equal to the security's market value at the time of disposal
• The specified transactions include transfers that count as market value disposals (such as transfers by personal representatives to legatees) and conversions of one deeply discounted security into other deeply discounted securities
• Special rules for exchanges and consolidations of government security strips and corporate strips may override the general market value acquisition rule
• The market value rule ensures that the acquirer's tax position reflects the economic value of the security at the point of transfer, regardless of whether any cash actually changed hands