It is important that changes to rules where a lender swaps debt for equity do not give rise to uncertainty that could prevent commercial rescues, writes Michael Bacon
The consultative document issued on 6 June Modernising the taxation of corporate debt and derivative contracts includes at section 11 proposals to change the legislation on the tax treatment of debt restructuring by amending CTA 2009 s 322(4) which deals with debt for equity swaps.
HMRC’s Corporate Finance Manual at CFM33200 sets out why the relief as it is now is needed:
‘Debt/equity swaps are usually prompted by the debtor company encountering trading difficulties. The transaction may involve the lender becoming the majority shareholder in the business sometimes with the intention of the shares being held over...
