HMRC internal manual

Corporate Finance Manual

CFM37290 - Loan relationships: special types of security: deeply discounted securities and close companies: postponement of debits

DDS and close companies: effect of CTA09/S409

Where a security falls within CTA09/S409 for the whole of any accounting period, debits accrued by the debtor for that period in respect of the discount are not allowed, and are brought in only when the security is redeemed.


Aldrow Ltd, a close company, issues loan notes with a face value of £12,000 to Mr Aldrow. The issue price is £10,000 and the notes will redeem in 5 years’ time. Mr Aldrow is the majority shareholder in Aldrow Ltd, and he holds the loan notes to redemption.


  • Aldrow Ltd is a close company
  • the security is a relevant discounted security
  • Mr Aldrow is a participator in Aldrow Ltd

the debits for the discount in the accounts of Aldrow Ltd will be excluded in the computation. The whole of the discount will be brought into account in the accounting period in which the notes redeem.

See also the example at CFM37310 showing how discount is treated in the case of a partnership where some of the discount is subject to postponement under S409.


CTA09/S409(4) deals with situations where a security falls within S409 for only part of an accounting period. The debits are time apportioned and the disallowance reflects the period during which the security falls within S409. See the examples at CFM37300.