Commentary

D6.211 Conversion of security rights

Corporate tax
Corporate tax | Commentary

D6.211 Conversion of security rights

Corporate tax | Commentary

D6.211 Conversion of security rights

Tax treatment of a conversion of securities

A conversion of securities is similar to a conversion of shares and will typically fall within the share reorganisation rules1 (D6.101–D6.103). It should therefore be neutral for chargeable gains tax purposes2. Broadly, this means a conversion of securities is treated as not involving any disposal of the original securities or acquisition of the new holding of securities. Instead the original securities and the new holding are regarded as the same asset acquired as the original securities were acquired.

Where consideration is paid by the holder of securities on a conversion, the amount is treated as consideration for the original securities3.

Where consideration other than securities is also received on conversion

Where a cash payment (eg a premium or a payment arising on the redenomination of securities into euros4) is received by the holder of securities on a conversion it is treated as consideration for the part disposal of the securities5.

There is relief from tax if the cash payment either:

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