Income Tax (Trading and Other Income) Act 2005 section 452F

Corporate strips: acquisitions and disposals

Section 452F sets out how to calculate the cost of each corporate strip when an interest-bearing corporate security is broken into strips, and how to treat consolidations of strips back into a single security.

• When a corporate security is stripped, the deemed acquisition cost of each strip is found by apportioning the original cost of the security according to the relative market values of the resulting strips (A × B / C).
• If the security being stripped is a deeply discounted security, the stripping is treated as a transfer at the original acquisition cost of that security.
• When strips are consolidated back into a single security, this counts as a disposal of each strip at its market value at the time of consolidation.
• The acquisition cost used in these calculations is the amount originally paid for the security, excluding any incidental acquisition costs.