HMRC has announced updated guidance on the tax treatment of debt-for-equity swaps which could have significant implications on debt restructurings, both past and future.
HMRC has announced updated guidance on the tax treatment of debt-for-equity swaps which could have significant implications on debt restructurings both past and future.
The basic rule is that where an unconnected creditor releases a corporate debtor from a debt the debtor recognises a profit equal to the debt released. This rule is a trap for the unwary on debt restructurings.
There are several exceptions which avoid a profit arising in this situation. The exception usually relied upon in restructurings (at CTA 2009 s 322(4)) provides that no profit arises ‘where the release is in consideration of shares forming part of the ordinary share capital of the debtor company’.
The shares must carry a potential right to receive distributions and they cannot be...
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HMRC has announced updated guidance on the tax treatment of debt-for-equity swaps which could have significant implications on debt restructurings, both past and future.
HMRC has announced updated guidance on the tax treatment of debt-for-equity swaps which could have significant implications on debt restructurings both past and future.
The basic rule is that where an unconnected creditor releases a corporate debtor from a debt the debtor recognises a profit equal to the debt released. This rule is a trap for the unwary on debt restructurings.
There are several exceptions which avoid a profit arising in this situation. The exception usually relied upon in restructurings (at CTA 2009 s 322(4)) provides that no profit arises ‘where the release is in consideration of shares forming part of the ordinary share capital of the debtor company’.
The shares must carry a potential right to receive distributions and they cannot be...
If you or your firm subscribes to Taxjournal.com, please click the login box below:
If you do not subscribe but are a registered user, please enter your details in the following boxes:
