Commentary

D1.893 Debtor relationship—embedded equity instrument

Corporate tax
Corporate tax | Commentary

D1.893 Debtor relationship—embedded equity instrument

Corporate tax | Commentary

D1.893 Debtor relationship—embedded equity instrument

As noted in D1.892, where a debtor loan relationship, which carries rights of conversion into the issuer's own shares, is bifurcated into a host contract and an equity instrument, the equity instrument falls outside the derivative contracts legislation. Despite this, provision is made to permit an issuer to obtain relief for a loss suffered in respect of an equity instrument as an allowable loss where it redeems or repurchases a loan relationship. Where a company realises a gain in respect of the equity instrument this gain is not brought into charge to tax.

An allowable loss

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