»Ê¹ÚÌåÓýapp

Conditions for S92 to apply

This guidance applies to periods of account beginning before 1 January 2005

In order for a holder of a security to benefit from the chargeable gains treatment, a number of conditions had to be fulfilled.

Connection

Firstly, there had to be no connection between the parties when the security was issued. If there was a connection, the security could never get CG treatment. »Ê¹ÚÌåÓýappre are details of this at CFM82150. (See also the transitional rules set out at CFM82160.)

Holder

Secondly, the security could not be trading stock in its wider sense i.e. circulating capital - for further information see CFM82140.

»Ê¹ÚÌåÓýapp convertible

Where the security was issued to an unconnected party, and was not held as trading stock, it then had to satisfy every oneof a number of conditions. »Ê¹ÚÌåÓýapp legislation concerning the issue terms that a security must satisfy were in FA96/S92(1), with further definitions in S92(1A)-(1D)

»Ê¹ÚÌåÓýappse conditions dealt with

• the nature of the security - see CFM82170
• the nature of the shares to be offered in exchange or for conversion - see CFM82220
• the monetary return on the security - see CFM82240

»Ê¹ÚÌåÓýapp aim was to ensure that the security genuinely provided the investor with an equity-type return. If the security failed any of these conditions, all profits or losses came within the loan relationship rules.