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Convertible securities: consideration for entitlement to convert

ITEPA03/S446G amends the effect of ITEPA03/S442 where the market value of the convertible securities (determined as if they were not) has been reduced by at least 10% as a result of things done otherwise than for genuine commercial purposes within the period of 7 years ending with the acquisition.

In ITEPA03/S442, consideration is to be regarded as given for the entitlement to convert the employment-related securities if (and only if) ACS exceeds NCMV.

So where ITEPA03/S446G applies, the value of NCMV is increased by the amount of the depreciatory transaction. This effectively reduces any allowance given by ITEPA03/S442.

Definitions

In ITEPA03/S442 (5):

NCMV is “the market value of convertible securities at the time of acquisition, determined as if they were not convertible (or not an interest in convertible securities)�.

ACS is “the amount of the consideration given for the acquisition of the employment-related securities�.