ERSM40080 - Convertible Securities
Amount of gain on chargeable event
How to calculate AG
The Taxable Amount described in
ERSM40070 uses AG – CE. The
method of calculating the amount of gain (AG) differs for each type
of chargeable event.
Conversion of securities
Disposal of securities
Release of entitlement to convert
Receipt of benefit in money’s worth in
connection with the entitlement to convert
1.
Conversion of securities
Where the chargeable event is the conversion of the securities, the amount of the gain is;
| CMVCS – (CMVERS + CC) |
where:
- CMVCS is the market value of the securities acquired on conversion at the time of the chargeable event. (If the securities acquired on conversion are themselves convertible, apply the market value as if they were not convertible)
- CMVERS is the market value of the original securities at the time of the chargeable event calculated as if they were not convertible.
- CC is the amount of any consideration given by the employee (or associated person) for the conversion of the securities (distinct from consideration given for the entitlement to convert).
See ITEPA03/S441 (2).
2.
Disposal of securities
Where the chargeable event is the disposal of the securities, the amount of the gain is;
| DC – CMVERS |
where:
- DC is the amount of consideration given by the person subsequently acquiring the securities, and
- CMVERS is the market value of the securities at the time of the chargeable event calculated as if the securities were not convertible.
By deducting the non-convertible market value of the securities, the taxable amount is limited to the value received from the sale of the conversion rights – see ITEPA03/S441 (3).
3.
Release of entitlement to convert
The amount of the gain is the amount of the consideration
received by the employee (or an associated person) for releasing
the entitlement to convert the securities.
Where the consideration received is an asset rather than
money, the amount of the consideration is the market value of that
asset (see
ERSM20390) – see
ITEPA03/S441 (4).
4.
Receipt of benefit in money’s worth in
connection with the entitlement to convert
The amount of the gain is the amount or market value of the benefit received – see ITEPA03/S441 (5).
