CFM33191 | Loan relationships the matters and computational rules: amounts not brought into account: debt releases: corporate rescue exemption: overview

This guidance is applicable to certain events that take place on or after 1 January 2015.

CTA09/S322(5B) and CTA09/323A

S322(5B) provides an exemption for a credit arising on the release of a debt where the release takes place on or after 1 January 2015 as part of what are commonly referred to as ‘corporate rescues’. The exemption applies where condition E in S322 (see CFM33180) is satisfied and it is reasonable to assume that, but for a release of a debt, there would be a material risk that at some time in the 12 months following the release the company would be unable to pay its debts. This is a less stringent criterion than the insolvency conditions, A and C, in S322 (CFM33190).

Where this is the case, the company is not required to bring into account a credit in respect of the release.

There is a similar exemption in CTA09/S323A for a credit that arises on the replacement or modification of a debt on or after 1 January, where this is part of a corporate rescue. In this case, where no credit has been brought into account, no debit may subsequently be brought into account where there is a later reversal of the exempted credit.

CFM33192 explains the policy intention behind the exemption in CTA09/S322(5B).

CFM33193 to CFM33195 explains the conditions required for the exemption to apply.

CFM33196 to CFM33198 explains the CTA09/S323A exemption.

Deemed releases

S322(5B) and S323A apply to credits arising on real debt releases and modifications. CFM35430 onwards explains that in certain circumstances a credit may arise on a ‘deemed release’ of a debt. There is a similar exemption from such a credit in cases involving a corporate rescue. See CFM35596 for more details.