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HMRC internal manual

Capital Gains Manual

Qualifying corporate bonds: FA96: loan relationships


This guidance describes the capital gains aspects of the regime for Loan Relationships for companies from 1 April 1996 until the first accounting period to start on or after 1 October 2002. For periods beginning on or after 1 October 2002 see CG54100+

Broadly speaking, a company has a loan relationship wherever it is a party (either as a creditor, or a debtor) to a debt which

  • arose from a transaction for the lending of money, and
  • is a `money debt’, defined as a debt which falls to be settled either by the payment of money, or by a debt which is itself a money debt.

For these purposes, `money’ includes foreign currency. Where an instrument is issued to represent security for, or the rights of a creditor over, a money debt, that debt may be treated as a debt arising from a transaction for the lending of money.

Further detail on the meaning of loan relationship is given at CT12100+.

Where profits or losses from loan relationships are subject to income treatment, they are specifically exempted from the capital gains charge by treating them as qualifying corporate bonds (QCBs). The previous rules for deciding whether a debt held by a company is a QCB, at CG53700+, ceased to apply from 31 March 1996. From 1 April 1996, for the purposes of Corporation Tax, only debts which are loan relationships can be QCBs, as a result of the new TCGA92/S117 (A1). However, some categories of loan relationship are not treated as QCBs, see CG54020+.