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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Qualifying corporate bonds: transitional: debts: company reorganisation

FA96/SCH15/PARA30The other circumstance where the transitional rules apply is where a person held a debt

  • on and immediately after 5 April 1996
  • which becomes a relevant discounted security on 6 April 1996
  • which was not a qualifying indexed security
  • which would not have been treated as a QCB if there had been a disposal of the debt at 5 April 1996, and
  • which came to be held by the person as a result of a transaction to which TCGA92/S127 applied.For further information on qualifying indexed securities, see CG53798.

TCGA92/S127 applies no disposal/single asset fictions to certain reorganisations of a company’s share capital, see CG51700+. This is extended to conversions of securities by TCGA92/S132, see CG55000+; and to share exchanges and company reconstructions and amalgamations, by TCGA92/S135 and TCGA92/S136, see CG52500+.

The aim of this rule is to ensure that any gain or loss attributable to an earlier asset, such as shares, is not taken into the income regime but remains as a chargeable gain or allowable loss.