Income Tax (Trading and Other Income) Act 2005 section 438

Timing of transfers and acquisitions

Section 438 establishes the timing rules for when a transfer or acquisition of a deeply discounted security is treated as taking place where the transaction is carried out under an agreement.

• Where a deeply discounted security is transferred or acquired under an agreement, and the recipient becomes entitled to it when the agreement is made, the transfer or acquisition is treated as occurring at that point
• If the agreement is conditional, it is treated as made only when the condition is satisfied — not when the agreement is first signed
• These timing rules are overridden in specific circumstances involving strips of government securities and corporate strips, as provided for elsewhere in the legislation
• The rule ensures clarity on the tax point for deeply discounted securities, particularly where there is a gap between agreement and actual delivery