CG54200 - Qualifying corporate bonds: relevant discounted securities: introduction
FA96 introduced substantial changes to the taxation treatment of debts. The paragraphswhich follow deal solely with the changes which apply to debts held by individuals, andother non-corporates including trustees, with effect from 6 April 1996. Changes whichapply to debts held by companies are covered at CG54000+.
FA96/SCH13 introduced a new category of debt, called a relevant discounted security. This superseded the previous separate categories of deep discount, deep gain, qualifying indexed, and qualifying convertible securities. The legislation on these was repealed for individuals with effect from 6 April 1996. CG54210+ provides outline advice on the meaning of relevant discounted security.
Relevant discounted securities are taken out of the capital gains regime by ensuring that they are treated as qualifying corporate bonds (QCBs), see CG53736.
For many debts becoming relevant discounted securities, any latent gain or loss up to 5 April 1996 simply becomes part of the eventual profit or loss taken into account in the income regime, when the debt is redeemed or otherwise disposed of. However, in some circumstances, transitional rules operate to keep any gain or loss on the debt up to 5 April 1996 within the capital gains regime. Advice on these transitional rules is at CG54230+.
Where a debt is not a relevant discounted security, you should continue to apply the normal capital gains rules to any redemption or other disposal, see CG53400+.