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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Qualifying corporate bonds: general definition

The expression ‘corporate bond’ is a general commercial term for securities issued by companies to raise debt finance and does not have any special tax significance except in the process of identifying qualifying corporate bonds (QCBs).

TCGA 1992 section 117 sets out the various criteria that have to be met before a security that is a corporate bond can be treated as a QCB. To establish whether a security can come within the meaning of a QCB as defined in section 117 you need to analyse the characteristics of both the security and the underlying debt. See CG53705 for the significance of the distinction between the security and the underlying debt. As the definition is written mainly in terms of the security, the guidance reflects that fact by referring to a security rather than a corporate bond.

The rules determining which securities can or cannot come within the meaning of a QCB have changed considerably since the legislation was first introduced in 1984. Therefore it is possible that a security may not have been a QCB when it was issued but is a QCB when it is disposed of. This could have presented difficulties in trying to ensure fair treatment to both the exchequer and the customer. To avoid such difficulties all amendments to the legislation which changed the relevant criteria have the following effect: if a security was not a QCB when first issued but, as a result of changes in the law, is a QCB at the time of disposal then that security is treated as if it always was a QCB. This effect is preserved in TCGA 1992 Sch 11 paragraph 16. See CG53716.

Note: If a security is not a QCB then it is treated in the same way as any other asset to which the TCGA would apply.