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HMRC internal manual

Capital Gains Manual

Qualifying corporate bonds: loan relationships: transitional

FA96/SCH15/PARA8 (10)

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 operate on the first disposal after 31 March 1996 of

  • the debt, or
  • any asset falling to be treated by TCGA1992 as the same asset for capital gains purposes.

This first disposal is described in the transitional rules as the `relevant event’. Disposal includes redemption of the debt, TCGA92/S251 (2).

No gain/no loss disposals within TCGA92/S139, TCGA92/S140A, TCGA92/S171 (1) or TCGA92/S172 are not to be treated as disposals for this purpose. In these cases, the transitional rules will operate on the first disposal, other than a further no gain/no loss disposal, by the transferee company.

The transitional rules also operate if the company holding the debt ceases to be within the charge to Corporation Tax. In these circumstances, the company is treated as having disposed of the debt immediately before ceasing to be within the charge.