Finance Act 1993

153 Qualifying assets and liabilities.U.K.

(1)As regards a qualifying company, each of the following is a qualifying asset—

(a)a right to settlement under a qualifying debt (whether or not the debt is a debt on a security);

(b)a unit of currency;

(c)a share held in qualifying circumstances;

but paragraph (a) above shall have effect subject to subsections (3) and (4) below.

(2)As regards a qualifying company, each of the following is a qualifying liability—

(a)a duty to settle under a qualifying debt (whether or not the debt is a debt on a security);

(b)a liability that takes the form of a provision made by the company in respect of a duty to which it may become subject and which (if it were to become subject to it) would be a duty to settle under a qualifying debt;

(c)a duty to transfer a right to settlement under a qualifying debt on a security, where the duty subsists under a contract and the company is not entitled to the right;

(d)a duty to transfer a share or shares, where the duty subsists under a contract and the company is not entitled to the share or shares;

but paragraphs (a) to (d) above shall have effect subject to subsections (5) to (9) below.

(3)A right to settlement under a qualifying debt is not a qualifying asset if it is a right under a currency contract.

(4)A right to settlement under a qualifying debt is not a qualifying asset if the debt is a debt on a security [F1and did not represent a normal commercial loan when it was created]; but the preceding provisions of this subsection do not apply if the security is a deep gain security or the right is held in qualifying circumstances.

(5)A duty to settle under a qualifying debt is not a qualifying liability if it is a duty under a currency contract.

(6)A duty to settle under a qualifying debt is not a qualifying liability if the debt is a debt on a security [F2and did not represent a normal commercial loan when it was created]; but the preceding provisions of this subsection do not apply if the security is a deep gain security.

(7)A liability falling within subsection (2)(b) above is not a qualifying liability unless—

(a)the duty to settle would (if the company were to become subject to it) be owed for the purposes of a trade, and

(b)the provision falls to be taken into account (apart from this Chapter) in computing the profits or losses of the trade for corporation tax purposes.

(8)A duty falling within subsection (2)(c) above is not a qualifying liability unless the right would be a qualifying asset if the company were entitled to it.

(9)A duty falling within subsection (2)(d) above is not a qualifying liability unless the share (or each of the shares) would be a qualifying asset if the company were entitled to it.

(10)For the purposes of this section each of the following is a qualifying debt—

(a)a debt falling to be settled by the payment of money;

(b)a debt falling to be settled by the transfer of a right to settlement under another debt, itself falling to be settled by the payment of money;

and for the purposes of this subsection an ecu shall be regarded as money.

(11)For the purposes of subsections (1)(c) and (4) above qualifying circumstances, in relation to an asset consisting of a share or a right to settlement, are circumstances where the qualifying company carries on a trade and—

(a)if the company were to transfer the asset, the transfer would fall to be taken into account (apart from this Chapter) in computing the profits or losses of the trade for corporation tax purposes, and

(b)if the asset were held by the company at the end of an accounting period, the valuation of the asset to be shown in the company’s accounts for that time would fall to be found by taking the local currency equivalent at that time of the valuation put on the asset by the company (whether at that time or earlier) expressed in the nominal currency of the asset;

and the reference here to the local currency is to the local currency of the trade for the accounting period.

[F3(11A)In subsections (4) and (6) above “normal commercial loan” has the meaning which would be given by sub-paragraph (5) of paragraph 1 of Schedule 18 to the Taxes Act 1988 if—

(a)for paragraph (a)(i) to (iii) of that sub-paragraph there were substituted the words “corporate bonds (within the meaning of section 117 of the Taxation of Chargeable Gains Act 1992)”, and

(b)paragraphs (b) and (c) of that sub-paragraph were omitted.]

(12)Interest accrued in respect of a debt shall not be treated as part of the debt.

153 Qualifying assets and liabilities.U.K.

(1)As regards a qualifying company, each of the following is a qualifying asset—

(a)a right to settlement under a qualifying debt (whether or not the debt is a debt on a security);

(b)a unit of currency;

(c)a share held in qualifying circumstances;

but paragraph (a) above shall have effect subject to subsections (3) and (4) below.

(2)As regards a qualifying company, each of the following is a qualifying liability—

(a)a duty to settle under a qualifying debt (whether or not the debt is a debt on a security);

(b)a liability that takes the form of a provision made by the company in respect of a duty to which it may become subject and which (if it were to become subject to it) would be a duty to settle under a qualifying debt;

(c)a duty to transfer a right to settlement under a qualifying debt on a security, where the duty subsists under a contract and the company is not entitled to the right;

(d)a duty to transfer a share or shares, where the duty subsists under a contract and the company is not entitled to the share or shares;

but paragraphs (a) to (d) above shall have effect subject to subsections (5) to (9) below.

(3)A right to settlement under a qualifying debt is not a qualifying asset if it is a right under a currency contract.

(4)A right to settlement under a qualifying debt is not a qualifying asset if the debt is a debt on a security which under the terms of issue can be converted into or exchanged for a share or shares; but the preceding provisions of this subsection do not apply if the security is a deep gain security or the right is held in qualifying circumstances.

(5)A duty to settle under a qualifying debt is not a qualifying liability if it is a duty under a currency contract.

(6)A duty to settle under a qualifying debt is not a qualifying liability if the debt is a debt on a security which under the terms of issue can be converted into or exchanged for a share or shares; but the preceding provisions of this subsection do not apply if the security is a deep gain security.

(7)A liability falling within subsection (2)(b) above is not a qualifying liability unless—

(a)the duty to settle would (if the company were to become subject to it) be owed for the purposes of a trade, and

(b)the provision falls to be taken into account (apart from this Chapter) in computing the profits or losses of the trade for corporation tax purposes.

(8)A duty falling within subsection (2)(c) above is not a qualifying liability unless the right would be a qualifying asset if the company were entitled to it.

(9)A duty falling within subsection (2)(d) above is not a qualifying liability unless the share (or each of the shares) would be a qualifying asset if the company were entitled to it.

(10)For the purposes of this section each of the following is a qualifying debt—

(a)a debt falling to be settled by the payment of money;

(b)a debt falling to be settled by the transfer of a right to settlement under another debt, itself falling to be settled by the payment of money;

and for the purposes of this subsection an ecu shall be regarded as money.

(11)For the purposes of subsections (1)(c) and (4) above qualifying circumstances, in relation to an asset consisting of a share or a right to settlement, are circumstances where the qualifying company carries on a trade and—

(a)if the company were to transfer the asset, the transfer would fall to be taken into account (apart from this Chapter) in computing the profits or losses of the trade for corporation tax purposes, and

(b)if the asset were held by the company at the end of an accounting period, the valuation of the asset to be shown in the company’s accounts for that time would fall to be found by taking the local currency equivalent at that time of the valuation put on the asset by the company (whether at that time or earlier) expressed in the nominal currency of the asset;

and the reference here to the local currency is to the local currency of the trade for the accounting period.

(12)Interest accrued in respect of a debt shall not be treated as part of the debt.