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D6.111 Reorganisations involving qualifying corporate bonds—overview

There are specific provisions which apply to reorganisations of share capital where either the original shares or the new shares are qualifying corporate bonds (QCBs). For the definition of what is a QCB, see C2.820.

The special rules for reorganisations involving QCBs apply when:

1. Ìý

   (a)ÌýÌýÌýÌý there is a reorganisation that falls within the statutory definition (D6.102)¹, and

2. Ìý

   (b)ÌýÌýÌýÌý the original holding (the 'old asset') is a QCB which is exchanged for a holding (the 'new asset') which is not a QCB (or vice versa)²

The provisions modify the normal rules applying to a reorganisation etc. Broadly, they disapply the 'no disposal' rule (D6.103) such that if the:

1. Ìý

   (i)ÌýÌýÌýÌý old asset is a QCB , it is treated as being disposed of for market value. However, as a QCB is not chargeable, any gain (or loss) is exempt. In addition, the new asset is deemed to have been acquired at the time of the reorganisation for market value

2. Ìý

   (ii)ÌýÌýÌýÌý new