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HMRC internal manual

Corporate Finance Manual

Old rules: asset-linked securities pre 2005: conditions: type of asset

Chargeable asset: definition

This guidance applies to periods of account beginning before 1 January 2005

FA96/S93(10) defined a chargeable asset for the purposes of S93 as

  • an estate or interest in land (wherever situated), or
  • qualifying ordinary shares which were listed on a recognised stock exchange.

These were assets whose value couldn’t easily be manipulated. So a company was unlikely to be able to manipulate the return on the loan to make it equate to a return by way of interest by manipulating the value of the asset.

Land: example

Abel plc issued a security for £100,000. The terms were that the amount to be repaid would be determined by reference to the change in the value of a piece of land in Spain. This land was worth

  • £500,000 at the time that the security was issued, and
  • £750,000 at the time of redemption.

The percentage increase in the value of the land was 50%, so the security would have redeemed for £150,000.


Qualifying ordinary shares were further defined in FA96/S93(12A) as any of the issued share capital of a company except those carrying

  • rights to a fixed-rate dividend only, with no other right to share in the company’s profits, or
  • no rights to any dividend or any other right to a share of the company’s profits.

The shares had to be listed on a recognised stock exchange (S93(10)). That did not have to be the London Stock Exchange; it could be the stock exchange of any country so long as it was recognised.

Shares: example 1

Agra plc issued a security for £100,000. The return on the security was linked to the value of ordinary shares in Botel Ltd. Botel Ltd was a subsidiary of Agra plc. Shares in Agra plc were listed on a recognised stock exchange but shares in Botel Ltd were not. The security was not within S93.

Shares: example 2

Albergo Ltd issued a security for £100,000. The return on the security was linked to the value of ordinary shares in Biscox plc. Biscox plc was a listed company. The asset was within S93.

During the period of the loan Biscox plc was bought out by Cardew plc. Under the terms of the takeover, shares in Biscox plc were exchanged for shares in Cardew plc on a 1 for 1 basis. Biscox plc’s business was transferred to Cardew plc and Biscox plc was struck off.

The return was linked to shares in Biscox plc, which no longer existed but could be identified with shares in Cardew plc because of the exchange. The terms of the security were likely to allow the holder to look through the takeover and treat the security as linked to the value of shares in Cardew plc. As long as shares in Cardew plc satisfied the conditions of S93, the security would continue to get S93 treatment.