Qualifying corporate bonds (QCB) meaning

Lynch v HMRC [2025] UKFTT 300 (TC) The appellant took part in a promoted tax avoidance arrangement spanning the 2010–11 to the 2013–14 tax years. The planning was disclosed pursuant to DOTAS. Participants made claims to deduct interest relief for borrowing to finance an investment in a partnership interest (sections 383, 398 of the Income Tax Act 2007 (ITA 2007)). It was ultimately accepted that this element of the planning was ineffective. The arrangements comprised a series of steps whereby a limited partnership bought and sold qualifying corporate bonds (QCBs). HMRC contended that, notwithstanding the failure of the arrangement as a whole, steps produced income chargeable as interest. HMRC opened enquiries and issued formal discovery assessments, comprising a charge to income tax on interest characterised as discount (sections 369, 371, 381, Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005)), and extended to premiums per Lomax (HM Inspector of Taxes) v Peter Dixon & Son, Ltd 25 TC 353)...

The way consideration payable for buying shares is arranged is rarely simple or linear, and can vary considerably. In many situations payment is postponed, deferred, or made conditional on a particular contingency being satisfied. Selling shareholders will look to maximise the overall price for their shares while also seeking to limit, so far as possible, any tax on disposal by: making full and efficient use of available reliefs to cut or remove any charge, and/or delaying the point in time at which any such tax becomes due However, where the consideration is deferred, the seller can become liable to tax immediately on an amount not yet received (a ‘dry’ tax charge). In calculating chargeable gains, no discount is usually allowed in respect of any consideration that is ascertainable at the date of disposal, even where it is: deferred subject to a contingency, or at risk of not being received for any reason Where any deferred...