CG54055 - Qualifying corporate bonds: loan relationships: excluded debt categories

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+

The transitional rules do not apply to

  • debts within FA96/S92 (convertibles)
  • debts within FA96/S93 (debts linked to chargeable assets).

These debts are excluded because gains or losses on disposal continue to be dealt with under capital gains rules, see CG54025 and CT54030.

  • debts which are relevant qualifying assets, see CG54055
  • debts within FA96/SCH15/PARA15. This is concerned with assets of insurance companies. Detailed advice is provided separately by Business Tax (Insurance).

Relevant qualifying assets are assets within the FOREX rules for which a value has already been determined, at the company’s FOREX commencement day, in order to calculate any attributed amount. These assets have, in effect, already been removed from the chargeable gains regime. The attributed amount represents the chargeable gain or allowable loss computed on the transition to the FOREX rules, see CG44050.

No further transitional charge is needed for these assets for capital gains purposes under FA96. But a further adjustment will be needed for such assets under FA96/SCH15/PARA11.

The definition of `relevant qualifying assets’ is modified by regulations where the asset concerned was held by a company carrying on long term insurance business or mutual general (non-life) insurance business. Further guidance is given in the Life Assurance Manual (see CG54035). Inspectors dealing with mutual general insurance companies outside the LBOs referred to in CG54035 should note that the effect of the regulations is remove the assets concerned from the categories of excluded assets listed in CG54055, so that the transitional provisions described in CG54050 apply to them.