Loan notes and qualifying corporate bonds (QCBs) and non-QCBs

Produced by Tolley

The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Loan notes and qualifying corporate bonds (QCBs) and non-QCBs
  • QCBs
  • Why are QCBs attractive?
  • Corporate shareholders of QCBs
  • QCB gains and business asset disposal relief
  • Impact of liquidation on QCBs
  • Non-QCBs
  • Anti-avoidance provisions
  • Other implications of loan notes
  • Withholding tax
  • More...

Loan notes and qualifying corporate bonds (QCBs) and non-QCBs

On the disposal of the shares in a company, a seller may receive loan stock in the acquiring company as consideration or part consideration for the sale. For tax purposes, loan notes are either qualifying corporate bonds (QCBs) or non-QCBs (NQCBs). The expression ‘corporate bond’ is a general commercial term for securities issued by companies to raise debt finance and does not have any special tax significance except in the process of identifying QCBs and non-QCBs. The issue, transfer and redemption of loan notes do not generally give rise to any liability to stamp duty or stamp duty reserve tax.

The way in which the loan notes are treated for tax purposes depends on whether the loan notes are classified as QCBs or non-QCBs. HMRC needs to be satisfied that the issue of the loan note is not for the purposes of tax avoidance. Therefore, it is always advisable to seek clearance from HMRC when entering into a transaction involving loan notes. For more information on this, see the Paper for paper treatment clearances guidance note.

Much of the commentary below relates to the tax position of the individual investor rather than the company. It is important for company directors and their advisers to understand the tax implications for investors when structuring transactions, as it is often a critical part of the deal. However, the individuals involved must obtain their own tax advice, which takes into account all of their own personal circumstances.


For loan stock to meet the definition of a QCB, it must satisfy three conditions:

  1. the loan stock must h

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