Income Tax (Trading and Other Income) Act 2005 section 447

Restriction of profits on strips by reference to original acquisition cost

Section 447 restricts the taxable profit on disposal of a government securities strip so that it cannot exceed the difference between the disposal proceeds and the original acquisition cost of the strip.

• Where a strip is held over a 5 April year end, a deemed disposal and reacquisition at market value occurs, which can reset the acquisition cost to a lower figure and inflate the apparent profit on actual disposal
• This section caps any profit on disposal to the excess of the disposal proceeds over the original acquisition cost, ignoring the annual 5 April revaluations
• If the disposal proceeds do not exceed the original acquisition cost, no profit arises at all
• The original acquisition cost is the amount actually paid (or treated as paid) to acquire the strip, determined without reference to any 5 April deemed disposals and reacquisitions under section 445