Q&As

What are the benefits to each of the buyer and seller in a sale and purchase (whether of shares or assets) where part of the consideration is paid by the issue of loan notes which are structured as qualifying corporate bonds (QCBs)?

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Produced in partnership with Julian Henwood of Gowling WLG
Published on LexisPSL on 21/03/2017

The following Corporate Q&A produced in partnership with Julian Henwood of Gowling WLG provides comprehensive and up to date legal information covering:

  • What are the benefits to each of the buyer and seller in a sale and purchase (whether of shares or assets) where part of the consideration is paid by the issue of loan notes which are structured as qualifying corporate bonds (QCBs)?

Qualifying corporate bonds (QCBs) are debt securities which are exempt from tax on chargeable gains. Disposing of a QCB accordingly gives rise to no chargeable gain or allowable loss for the purposes of capital gains tax, with one exception. Where:

  1. there is a share disposal that would otherwise have given rise to a chargeable gain, and

  2. QCBs were issued as consideration for those shares and the existing chargeable gain is held over

disposal of the QCB will crystallise the chargeable gain. For further information on QCBs, see Practice Note: Share for share exchanges and qualifying corporate bonds (QCBs).

If an individual or trustee receives QCBs as consideration for shares in a takeover or reorganisation, the gain on the sale of the shares is held over and will not be brought into charge until the QCBs are disposed of (unless an election is made alongside a claim for entrepreneurs' relief, where applicable).

For entities within the charge to corporation tax, with limited excep

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