CG53444 | Other debts deemed to be securities: loan relationships of companies

FA96/S86, FA96/S87

The regime for taxation of loan relationships held by companies, introduced in FA1996, had the effect of removing most debt held by companies from the capital gains charge entirely. Instead, any profits or losses on these debts, as well as interest, are charged or allowed as income. For further detail see CG54000+.

Certain types of loan relationship are not however dealt with in this way, and any charge or allowance on redemption or other disposal of the debt remains to be dealt with under the Capital Gains rules. This applies to debts which

• are convertible into shares, see CG54025+, or

• are linked to the value of chargeable assets, see CG54030+.

These debts are kept within the capital gains regime because their value will reflect the value of the shares or other chargeable assets to which they are linked.

TCGA92/S251 (7) and TCGA92/S251 (8) treats these debts as securities for TCGA purposes, where the disposal of the debt gives rise to a gain. You should note that this treatment applies only where there is a gain. The exemption in TCGA92/S251 (1) continues to apply, in appropriate cases, where there is a loss on disposal of these debts.