Revenue Note for Guidance

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Revenue Note for Guidance

585 Conversion of securities

Summary

This section provides that the rules of section 584 relating to a reorganisation or reduction of share capital also apply to the conversion of securities.

Details

Definitions

(1)conversion of securities” includes —

  • the conversion of securities into shares,
  • a conversion, at the option of the holder of the securities, as a alternative to the redemption of the securities for cash, where the conversion takes place before 4 December 2002 or where the conversion takes place after that date pursuant to a written binding agreement made before that date, and
  • an exchange of securities made in pursuance of any law providing for the compulsory acquisition of shares or securities in return for the issue of securities or other securities.

Investment undertaking” and “unit” have the same meaning respectively as in section 739B.

security” includes any loan stock or other similar securities, whether of a government, public authority or company and whether secured or unsecured, but does not include securities which are exempt from capital gains tax under section 607.

(1A) A conversion of securities shall not, however, include a conversion of securities into units in an investment undertaking, being a company.

Application of section 584

(2) Section 584 applies in relation to the conversion of securities in the same way as it applies to the reorganisation or reduction of a company’s share capital. Consequently, such a conversion is not treated as a disposal for capital gains tax purposes.

Relevant Date: Finance Act 2020