1A

If—

a

the profits and gains arising to any person for any chargeable period include both rent in respect of any such easement as is mentioned in subsection (1) above and amounts which are charged to tax under Schedule A, and

b

some or all of the land to which the easement relates is included in the land by reference to which the amounts charged under Schedule A arise,

then, for that period, that rent shall be charged to tax under Schedule A, instead of being charged under Schedule D.

8

In this section “foreign income dividends” shall be construed in accordance with Chapter VA of Part VI.

4

In subsection (3)(a)(ia) above the reference to the conversion of a security of a company into a qualifying corporate bond includes a reference to—

a

any such conversion of a debenture of that company that is deemed to be a security for the purposes of section 251 as produces a security of that company which is a qualifying corporate bond; and

b

any such conversion of a security of that company, or of a debenture that is deemed to be a security for those purposes, as produces a debenture of that company which, when deemed to be a security for those purposes, is such a bond.

5

In subsection (3)(a)(ib) above the reference to the conversion of a qualifying corporate bond into a security of the same company which is not such a bond includes a reference to any conversion of a qualifying corporate bond which produces a debenture which—

a

is not a security; and

b

when deemed to be a security for the purposes of section 251, is not such a bond.

and any debenture which results from a conversion of securities within the meaning of section 132, or is issued in pursuance of rights attached to such a debenture, shall be deemed for the purposes of this section to be a security (as defined in that section).

138A Use of earn-out rights for exchange of securities.

1

For the purposes of this section an earn-out right is so much of any right conferred on any person (“the seller”) as—

a

constitutes the whole or any part of the consideration for the transfer by him of shares in or debentures of a company (“the old securities”);

b

consists in a right to be issued with shares in or debentures of another company (“the new company”);

c

is such that the value or quantity of the shares or debentures to be issued in pursuance of the right (“the new securities”) is unascertainable at the time when the right is conferred; and

d

is not capable of being discharged in accordance with its terms otherwise than by the issue of the new securities.

2

Where—

a

there is an earn-out right,

b

the exchange of the old securities for the earn-out right is an exchange to which section 135 would apply, in a manner unaffected by section 137, if the earn-out right were an ascertainable amount of shares in or debentures of the new company, and

c

the seller elects under this section for the earn-out right to be treated as a security of the new company,

this Act shall have effect, in the case of the seller and every other person who from time to time has the earn-out right, in accordance with the assumptions specified in subsection (3) below.

3

Those assumptions are—

a

that the earn-out right is a security within the definition in section 132;

b

that the security consisting in the earn-out right is a security of the new company and is incapable of being a qualifying corporate bond for the purposes of this Act;

c

that references in this Act (including those in this section) to a debenture include references to a right that is assumed to be a security in accordance with paragraph (a) above; and

d

that the issue of shares or debentures in pursuance of such a right constitutes the conversion of the right, in so far as it is discharged by the issue, into the shares or debentures that are issued.

4

For the purposes of this section where—

a

any right which is assumed, in accordance with this section, to be a security of a company (“the old right”) is extinguished,

b

the whole of the consideration for the extinguishment of the old right consists in another right (“the new right”) to be issued with shares in or debentures of that company,

c

the new right is such that the value or quantity of the shares or debentures to be issued in pursuance of the right (“the replacement securities”) is unascertainable at the time when the old right is extinguished,

d

the new right is not capable of being discharged in accordance with its terms otherwise than by the issue of the replacement securities, and

e

the person on whom the new right is conferred elects under this section for it to be treated as a security of that company,

the assumptions specified in subsection (3) above shall have effect in relation to the new right, in the case of that person and every other person who from time to time has the new right, as they had effect in relation to the old right.

5

An election under this section in respect of any right must be made, by a notice given to an officer of the Board—

a

in the case of an election by a company within the charge to corporation tax, within the period of two years from the end of the accounting period in which the right is conferred; and

b

in any other case, on or before the first anniversary of the 31st January next following the year of assessment in which that right is conferred.

6

An election under this section shall be irrevocable.

7

Subject to subsections (8) to (10) below, where any right to be issued with shares in or debentures of a company is conferred on any person, the value or quantity of the shares or debentures to be issued in pursuance of that right shall be taken for the purposes of this section to be unascertainable at a particular time if, and only if—

a

it is made referable to matters relating to any business or assets of one or more relevant companies; and

b

those matters are uncertain at that time on account of future business or future assets being included in the business or assets to which they relate.

8

Where a right to be issued with shares or debentures is conferred wholly or partly in consideration for the transfer of other shares or debentures or the extinguishment of any right, the value and quantity of the shares or debentures to be issued shall not be taken for the purposes of this section to be unascertainable in any case where, if—

a

the transfer or extinguishment were a disposal, and

b

a gain on that disposal fell to be computed in accordance with this Act,

the shares or debentures to be issued would, in pursuance of section 48, be themselves regarded as, or as included in, the consideration for the disposal.

9

Where any right to be issued with shares in or debentures of a company comprises an option to choose between shares in that company and debentures of that company, the existence of that option shall not, by itself, be taken for the purposes of this section either—

a

to make unascertainable the value or quantity of the shares or debentures to be issued; or

b

to prevent the requirements of subsection (1)(b) and (d) or (4)(b) and (d) above from being satisfied in relation to that right.

10

For the purposes of this section the value or quantity of shares or debentures shall not be taken to be unascertainable by reason only that it has not been fixed if it will be fixed by reference to the other and the other is ascertainable.

11

In subsection (7) above “relevant company”, in relation to any right to be issued with shares in or debentures of a company, means—

a

that company or any company which is in the same group of companies as that company; or

b

the company for whose shares or debentures that right was or was part of the consideration, or any company in the same group of companies as that company;

and in this subsection the reference to a group of companies shall be construed in accordance with section 170(2) to (14).

a

if the repayment is—

i

the repayment of an amount paid in accordance with the requirements of section 59A of the Management Act on account of income tax for a year of assessment, or

ii

the repayment of income tax for such a year which is not income tax deducted at source,

the relevant time is the date of the payment that is being repaid;

b

if the repayment is of income tax deducted at source for a year of assessment, the relevant time is the 31st January next following that year; and

4

For the purposes of subsection (3) above, where a repayment in respect of income tax for a year of assessment is made to any person, that repayment—

a

shall be attributed first to so much of any payment made by him under section 59B of the Management Act as is a payment in respect of income tax for that year;

b

in so far as it exceeds the amount (if any) to which it is attributable under paragraph (a) above, shall be attributed in two equal parts to each of the payments made by him under section 59A of the Management Act on account of income tax for that year;

c

in so far as it exceeds the amounts (if any) to which it is attributable under paragraphs (a) and (b) above, shall be attributed to income tax deducted at source for that year; and

d

in so far as it is attributable to a payment made in instalments shall be attributed to a later instalment before being attributed to an earlier one.

4A

In this section any reference to income tax deducted at source for a year of assessment is a reference to—

a

income tax deducted or treated as deducted from any income, or treated as paid on any income, in respect of that year, and

b

amounts which, in respect of that year, are tax credits to which section 231 applies,

but does not include a reference to amounts which, in that year, are deducted at source under section 203 in respect of previous years.