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HMRC internal manual

Capital Gains Manual

Qualifying corporate bonds: definition: inclusion of specific assets

Some of the subsections in TCGA 1992 section 117 specifically direct that certain assets are qualifying corporate bonds (QCBs) and that certain other assets are not. This paragraph covers those subsections not mentioned elsewhere in this part of the guidance.

  • Subsection 2AA: Any asset which is a deeply discounted security for the purposes of ITTOIA 2005 is to be treated as a qualifying corporate bond even if that asset does not meet the criteria in section 117(1). Note: Subsection (8A) directs that an asset falling within subsection (2AA) is a QCB whatever its date of issue.
  • Subsections (4) & (5): the term ‘qualifying corporate bond’ includes a share in a building society issued after 13 March 1984 which is
    1. either a permanent interest bearing share (PIBS), see CFM14140, or,
      1. of a description specified in regulations made by the Treasury for these purposes -
    1. is expressed in sterling and in respect of which no provision is made for conversion into or redemption in a currency other than sterling.

Note: the ‘expressed in sterling’ and ‘no provision for conversion’ conditions correspond to the conditions in subsection (1)(b). Subsection (2) applies (as explained at CG53706 above) to qualify both sets of conditions: subsection (6) tells us to apply subsection (2) to building society share rules in the same way as they apply to the rules for securities.

Subsection (11)(b) provides that a PIBS must be a share which is a permanent interest bearing share for the purposes of the General Prudential Sourcebook made by the FSA.

  • Subsections (6B) & (6C): These subsections provide that excluded indexed securities issued on or after 6 April 1996 are not corporate bonds and so cannot be QCBs. ITTOIA 2005 Chapter 8 Part 4 section 433 defines excluded indexed securities, see SAIM 3050.

Where an excluded indexed security was issued before 6 April 1996 it is taken to be a corporate bond provided that it would be a corporate bond if subsection (6B) did not exist and the question as to why it is a corporate bond arises for the purposes of section 116(10), see CG53709 - CG53718.

  • Subsection (6D): This subsection refers to sections 151N & 151T which deal with investment bond arrangements under alternative finance arrangements. The effect is that if the conditions in section 151T are met such an investment bond is a QCB.
  • Subsection (11)(a): For the purposes of section 117 a provisional security that is comprised in a letter of allotment or similar instrument is not issued until accepted. In this context, a security is ‘comprised’ in a letter of allotment if the letter refers to the security and grants the holder of the letter a right to that security.