What does section 450 of the Income Tax (Trading and Other Income) Act 2005 do?

Section 450 grants the Treasury the power to make regulations prescribing how to determine the market value of government security strips at any given time. This valuation is essential for calculating income tax profits and losses arising from the acquisition, holding and disposal of strips under the wider chapter on strips of government securities.

Why is determining the market value of strips important for income tax purposes?

When a gilt is stripped into its coupon and principal components, or when strips are reconstituted, accurate market values are needed to establish deemed proceeds and acquisition costs under section 445. These values feed directly into the calculation of profits and losses that are chargeable to income tax on the holder.

Can the Treasury regulations under section 450 vary for different situations?

Yes. The regulations may make different provision for different cases, such as distinguishing between different types of strips or different market conditions. They may also include incidental, supplemental, consequential and transitional provisions and savings to ensure practical application and prevent gaps in the legislation.

How might market value of a strip be determined under the Treasury's regulations?

The Treasury's regulations may prescribe methods such as referencing prices published by the Debt Management Office or using a specified discounting method. The chosen approach ensures consistency and accuracy when calculating the market value of strips for income tax purposes across different transactions and market conditions.

Income Tax (Trading and Other Income) Act 2005 section 450

Market value of strips etc.

Section 450 gives the Treasury the power to make regulations setting out how to determine the market value of government security strips and securities exchanged for strips.

The Treasury may make regulations prescribing the method for determining the market value of a strip at any given time for the purposes of this chapter.
The regulations may also prescribe how to determine the market value of a security that has been exchanged for strips of that security, as required under section 445(1).
The regulations may make different provision for different circumstances, allowing flexibility in how market values are determined depending on the situation.
The regulations may include incidental, supplemental, consequential and transitional provisions and savings to support their practical application.

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