Capital gains tax | Commentary

C2.820 Definition

Capital gains tax | Commentary

Qualifying corporate bonds

C2.820 Definition

Since they were first introduced there have been many changes in the definitions of a corporate bond and a qualifying corporate bond ('QCB'). However, as the capital gains tax exemption only applies where the asset is a QCB at the time of its disposal (see C2.821), the definitions which applied to disposals before 1996 are not described in this article.

Corporate bond

A security is a corporate bond if it satisfies the following conditions1:


    (a)     it is loan stock or similar security issued by the UK or any foreign government or local authority or by any company, whether secured or unsecured2


    (b)     the debt on it represents at all times a normal commercial loan3 (see below)


    (c)     it is expressed in sterling4, and that amount of currency must not fluctuate by reference to any other currency or asset5


    (d)     it is not convertible into any currency other than sterling6 and can only be redeemed in another currency at the rate prevailing at redemption7. (HMRC allow a redemption at the exchange rate prevailing within 10 business days before the redemption date8.) In Trigg9, the Court of Appeal found that a condition applying to corporate bonds which provided for their redemption in euros in the event that the Euro became the currency of the UK, did not prevent them from being qualifying corporate bonds

A corporate bond also includes:


    •     a debenture, issued after 15 March 1993 in a reorganisation or reconstruction, which would not be a security

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