Rely on the most comprehensive, up-to-date legal content designed and curated by lawyers for lawyers
Work faster and smarter to improve your drafting productivity without increasing risk
Accelerate the creation and use of high quality and trusted legal documents and forms
Streamline how you manage your legal business with proven tools and processes
Manage risk and compliance in your organisation to reduce your risk profile
Stay up to date and informed with insights from our trusted experts, news and information sources
Access the best content in the industry, effortlessly — confident that your news is trustworthy and up to date.
With over 30 practice areas, we have all bases covered. Find out how we can help
Our trusted tax intelligence solutions, highly-regarded exam training and education materials help guide and tutor Tax professionals
Regulatory, business information and analytics solutions that help professionals make better decisions
A leading provider of software platforms for professional services firms
In-depth analysis, commentary and practical information to help you protect your business
LexisNexis Blogs shed light on topics affecting the legal profession and the issues you're facing
Legal professionals trust us to help navigate change. Find out how we help ensure they exceed expectations
Lex Chat is a LexisNexis current affairs podcast sharing insights on topics for the legal profession
Discuss the latest legal developments, ask questions, and share best practice with other LexisPSL subscribers
When a company is in financial distress, it needs to act quickly and one factor in determining which restructuring route to pursue may be the relevant tax treatment of the deal. By extending the cases where tax relief is available, the government hopes to promote a greater range of options. Lara Okukenu, senior tax manager at Deloitte, explains the changes put forward.
When an unconnected debt is released—ie the creditor waives the debtor’s obligation to repay—amounts credited in the debtor’s accounts in respect of the release will normally be taxable as loan relationship credits.
This requirement to tax the release credit does not apply where:
Despite this, however, until the draft Finance Bill 2015, no such relief was afforded for companies in financial distress for whom a debt/equity swap or formal insolvency processes were not appropriate. The government has sought to address this by introducing new provisions removing the need to bring into account loan relationship credits arising on a release of debt, where it is reasonable to assume that—but for the release—there would be a material risk that within the 12 months following the company would be unable to pay its debts.
The terms ‘reasonable to assume’ and ‘material risk’ should, when taken together, mean there must be a realistic likelihood of the company going into insolvency within 12 months of the date of the release if remedial action is not taken.
This is intended to hypothesise a position that would have happened but for the debt release. It is not intended to imply that the company’s directors are currently in breach of their company law obligations by continuing to trade.
There is no prescriptive list of evidence that must be provided to benefit from the tax relief, however draft HMRC guidance does provide a list
Access this article and thousands of others like it free by subscribing to our blog.
Read full article
Already a subscriber? Login
0330 161 1234