Taxation (International and Other Provisions) Act 2010 section 238

Shares subject to conversion

Section 238 defines a type of "deduction scheme" involving shares that are subject to conversion — that is, shares which may be converted into, or exchanged for, a different type of security or share, where this feature creates a tax mismatch.

• A scheme qualifies as a deduction scheme under this section if it involves the issuance or transfer of shares that are subject to conversion, and the conversion feature gives rise to a tax advantage.
• "Shares subject to conversion" are shares where, at the relevant time, there is an arrangement or expectation that they will be converted into, or exchanged for, securities or shares of a different description.
• The section sets out two alternative ways a scheme can fall within this definition: one based on the issuing of shares subject to conversion, and one based on the transfer of such shares.
• The "relevant time" is defined separately for each of the two alternative routes into the provision — ensuring the correct timing test applies depending on whether the scheme involves an issuance or a transfer of the shares in question.