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HMRC internal manual

Community investment tax relief manual

Restructuring of community development finance institutions (CDFIs): Reorganisation involving qualifying corporate bonds

TCGA92/s151BB The Taxation of Chargeable Gains Act 1992 includes specific provisions concerning reorganisations involving an issue of qualifying corporate bonds (QCBs). Under TCGA92/S116(10), a reorganisation of share capital in which shares are exchanged for QCBs does not crystallise any chargeable gain or allowable loss at the time of the exchange (see CG53845). Instead, the gain or loss relating to the shares is deemed to accrue on a subsequent disposal of the whole or part of the QCBs.

But TCGA92/S116(10) is disapplied where

  • there is a reorganisation of shares which have community investment tax relief attributed to them immediately before the reorganisation
  • the investor has held those shares continuously since their issue, and
  • the shares are exchanged for qualifying corporate bonds.

The effect is that the investor is treated as disposing of any shares to which community investment tax relief is attributable where QCBs are issued as a result of a reorganisation of those shares. Any chargeable gain or allowable loss arising on those shares will be crystallised at the time of the reorganisation.