Section 358 | Exclusion of credits on release of connected companies debts: general

(1)This section applies if—

(a)a liability to pay an amount under a debtor relationship of a company (“D”) is released, and^F1

(b)the release takes place in an accounting period for which—

(i)an amortised cost basis of accounting is used in respect of the relationship, and

(ii)the relationship is a connected companies relationship.

(2)D is only required to bring a credit into account in respect of the release for the purposes of this Part if^F2

(a)it is a deemed release, or^F2

(b)it is a release of relevant rights.^F2

(3)In subsection (2) “deemed release” means a release which is deemed to occur because of—

(a)section 361 (acquisition of creditor rights by connected company at undervalue), or

(b)section 362 (parties becoming connected where creditor's rights subject to impairment adjustment).

(4)For the purposes of this section “relevant rights” means rights of a company (“C”) that—^F3F4

(a)were acquired by C, before the day on which F(No2)A 2015 was passed, in circumstances that, but for the application of the old corporate rescue exception or the old debt-for-debt exception, would have resulted in a deemed release under section 361(3), or^F3F4

(b)were acquired by another company before that day in such circumstances and transferred to C by way of an assignment or assignments.^F3F4

(4A)In subsection (4)(a)—^F3F4

(a)“the old corporate rescue exception” means the exception in section 361A (as it had effect before F(No2)A 2015);^F3F4

(b)“the old debt-for-debt exception” means the exception in section 361B (as it had effect before that Act).^F3F4

(5)The amount of the credit that D is required to bring into account in respect of a release of relevant rights is—^F3

(a)the amount of the discount received on the acquisition, less^F3

(b)the sum of any credits brought into account in respect of that amount (whether in the accounting period in which the release takes place or in a previous accounting period) by C or, in a case within subsection (4)(b), by the company that acquired the rights or any company to which the rights were subsequently assigned.^F3

(6)A reference in subsection (5) to the amount of the discount received on the acquisition is to the amount that would have been treated as released under section 361(4) on the acquisition, but for the application of the corporate rescue exception or the debt-for-debt exception.^F3

(7)Where the carrying value of a liability representing the debtor relationship has at any time been adjusted as a result of the liability being the hedged item under a designated fair value hedge, this section does not prevent a credit or debit being brought into account for the purposes of this Part in respect of any reversal of that adjustment.^F5

(8)Nothing in this section affects the credits or debits to be brought into account for the purposes of this Part in respect of exchange gains or losses arising from a debt.^F5