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HMRC internal manual

Capital Gains Manual

Other debts deemed to be securities: loan relationships of companies

FA96/S86, FA96/S87

The new regime for taxation of loan relationships held by companies, introduced in FA1996, had the effect of removing most debt held by companies from the capital gains charge entirely. Instead, any profits or losses on these debts, as well as interest, are charged or allowed as income. For further detail see CG54000+.

Certain types of loan relationship are not however dealt with in this way, and any charge or allowance on redemption or other disposal of the debt remains to be dealt with under the Capital Gains rules. This applies to debts which

  • are convertible into shares, see CG54025+, or
  • are linked to the value of chargeable assets, see CG54030+.

These debts are kept within the capital gains regime because their value will reflect the value of the shares or other chargeable assets to which they are linked.