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HMRC internal manual

Capital Gains Manual

From:
HM Revenue & Customs
Published:
12 March 2016
Updated:
31 July 2026 - See all updates

CG53700 - Qualifying corporate bonds: general background and statutory history

General background

This section of the manual concentrates on the application of the TCGA to Qualifying Corporate Bonds (QCBs) that do not come within other parts of the Taxes Acts.

Note that TCGA 1992 section 117(A1) specifically provides that any asset that represents a loan relationship of a company is a QCB, see CG53704 below.

The guidance on QCBs begins with the legislation that was in place at 2002 and explains changes made since that date. If you need to consider the guidance on legislation before 2002 then please contact the Capital Gains Technical Team in BAI.

A number of cases have been heard by the courts involving schemes that were designed to exploit the interaction of sections of the statute within TCGA 1992 Part IV Chapters 1 & II. Guidance on these can be found at CG53729.


Statutory history

FA 1984 introduced legislation that was designed to promote the market in securities issued by companies in the UK.

The thrust of the legislation is that capital gains which accrue on the disposal of securities that meet the necessary conditions to come within the meaning of Qualifying Corporate Bonds’ (QCBs) are not to be treated as chargeable gains. There have been a number of significant changes since 1984, most notably:

  1. One of the original requirements was that QCB status was restricted to securities issued by companies quoted on a UK stock exchange or companies dealt in on the Unlisted Securities Market. In 1989 this requirement was dropped. This simple change had the effect of massively expanding the number of securities which qualify for the exemption.
  2. FA 1993 and FA 1994 introduced legislation for the treatment of exchange differences and financial instruments (“FOREX”), which had an impact on how the TCGA applied to certain debt, and hence to certain securities. This legislation was itself repealed by that relating to Loan Relationships and Derivative Contracts, see 3 and 4 below.
  3. FA 1996 and FA 2002 introduced changes that affect most debt held by corporates whereby such debt is held to be QCBs and thus will no longer be within the charge to corporation tax on capital gains. FA 2002 brought exchange differences within the Loan Relationship rules. CFM34160+ provides fuller details on Loan Relationships but see also CG54000.
  4. FA 2002 also introduced Derivative Contract rules which replaced existing rules on financial instruments. Those 2002 rules were themselves changed from 1 January 2005. CFM53120+ covers Derivative Contracts in more detail but see also CG54160.

The major part of the original QCB legislation that was introduced in 1984 is still relevant although some of it has been repealed as indeed have some of the changes made since 1984.