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HMRC internal manual

Capital Gains Manual

Qualifying corporate bonds: loan relationships: transitional: charge

FA96/SCH15/PARA8 (6) - (8)

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 computation is modified to prevent recognition of gains or losses which originated from a time when the asset, or the company, was not liable to Corporation Tax. The modified rules apply where a disposal of the asset by

  • the company holding the asset at 31 March 1996, or
  • any earlier company from which the asset was acquired by a no gain/no loss transaction, or series of such transactions, within TCGA92/S35 (3)(d)

at any time before 1 April 1996, would have not been brought into charge to Corporation Tax on chargeable gains, because the company was not resident and the gain would not be included in the company’s chargeable profits under TCGA92/S10 (3), see CG42100.

In these cases, the asset is deemed to have been acquired, at its market value, on the first day when a disposal of the asset at a gain would have been included in the chargeable profits of the company holding the asset, for the purposes of Corporation Tax. Any allowable losses which might have been available for deduction against the gain under TCGA92/S8 (1) or TCGA92/SCH7A are to be disregarded for this purpose.