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HM 74: Transition: entities with non-standard income years
or “Rules for companies with special financial years becoming PIEs”
You could also call this:

“How shares are handled when you become or stop being a PIE”

When you choose to become a PIE (Portfolio Investment Entity), there are special rules about how your shares are treated. If you own shares in a company that isn’t a PIE and won’t become one within 6 months of you becoming a PIE, the law treats those shares in a specific way. It’s as if you sold the shares and then bought them back at their current market value. This pretend sale and repurchase happens the day before you officially become a PIE.

The same thing happens if you stop being a PIE, either because you no longer meet the requirements in sections HM 24 to HM 28 or because you choose to cancel your PIE status under section HM 29. If you have shares that would have special tax treatment while you’re a PIE, the law treats it as if you sold and repurchased those shares at their market value. This pretend sale and repurchase is considered to happen the day before you stop being a PIE.

These rules are important because they help figure out how much tax you need to pay on these shares when your status as a PIE changes.

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Next up: HM 76: Transition: FDPA companies

or “Rules for FDPA companies changing company type no longer apply”
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Part H Taxation of certain entities
Portfolio investment entities: Elections and consequences

HM 75Transition: treatment of shares held in certain companies

  1. Subsection (2) applies when—

  2. an entity chooses to become a PIE; and
    1. before the election takes effect—
      1. the entity holds a share in relation to which the proceeds of disposal would be excluded income under section CX 55(3)(a) and (b) (Proceeds from disposal of investment shares) once the entity becomes a PIE:
        1. the entity is a share supplier in a returning share transfer in relation to that type of share; and
        2. the share is in a company that is not a PIE and does not become a PIE within 6 months from the date on which the entity became a PIE.

          1. The entity is treated as—

          2. disposing of the share to another person; and
            1. receiving consideration of an amount that equals the market value of the share at the time; and
              1. reacquiring the share from the other person for the same consideration.

                1. The disposal and reacquisition is treated as occurring on the day before that on which the election takes effect.

                2. Subsection (5) applies when an entity—

                3. loses PIE status under any of sections HM 24 to HM 28 or chooses to cancel PIE status under section HM 29; and
                  1. holds a share in relation to which the proceeds of disposal would be excluded income under section CX 55(3)(a) and (b) while the entity is a PIE.

                    1. The entity is treated as—

                    2. disposing of the share to another person; and
                      1. receiving consideration of an amount that equals the market value of the share at the time; and
                        1. reacquiring the share from the other person for the same consideration.

                          1. The disposal and reacquisition is treated as occurring on the day before PIE status is lost.

                          Compare
                          • ss HL 13(3), HL 15(3)
                          Notes
                          • Section HM 75: inserted, on (applying for the 2010–11 and later income years), by section 292(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).