Relevant debt relief circumstances

259NEBRelevant debt relief circumstances: introductory

1

This section applies for the purposes of section 259CB(3).

2

Excess arises in “relevant debt relief circumstances” if (and only if)—

a

the payment or quasi-payment mentioned in section 259CB(2) comprises the release of a liability to pay an amount under a debtor relationship (within the meaning given by section 302(6) of CTA 2009), and

b

the circumstances in section 259NEC, 259NED, 259NEE, or 259NEF apply.

3

For the purposes of those sections references to—

a

“the relevant release” means the release of liability mentioned in subsection (2)(a),

b

“loan relationship” is to be construed in accordance with section 302 of CTA 2009,

c

“amortised cost basis of accounting” is to be construed in accordance with section 313(4) and (4A) of that Act,

d

“connected companies relationship” is to be construed in accordance with section 348 of that Act, and

e

“deemed release” and “relevant rights” are to be construed in accordance with section 358(3) to (4A) of that Act.

259NECRelease of debts

1

This section is to be read with section 259NEB (relevant debt relief circumstances: introductory).

2

The circumstances in this section are—

a

the relevant release takes place in an accounting period for which an amortised cost basis of accounting is used in respect of the debtor relationship, and

b

condition A, B, C, D or E is met.

3

Condition A is that the release is part of a statutory insolvency arrangement (within the meaning of section 1319 of CTA 2009).

4

Condition B is that the release is not a release of relevant rights and is—

a

in consideration of shares forming part of the ordinary share capital of a payee, or

b

in consideration of any entitlement to such shares.

5

Condition C is that—

a

a payee meets one of the insolvency conditions (see subsection (8)), and

b

the debtor relationship is not a connected companies relationship.

6

Condition D is that the release is in consequence of the making of a mandatory reduction instrument or a third country instrument or the exercise of a stabilisation power under Part 1 of the Banking Act 2009.

7

Condition E is that—

a

the release is neither a deemed release nor a release of relevant rights, and

b

immediately before the release, it is reasonable to assume that, without the release and any arrangements of which the release forms part, there would be a material risk that at some time within the next 12 months a payee would be unable to pay its debts.

8

For the purposes of this section a company meets the insolvency conditions if—

a

it is in insolvent liquidation,

b

it is in insolvent administration,

c

it is in insolvent administrative receivership,

d

an appointment of a provisional liquidator is in force in relation to the company under section 135 of the Insolvency Act 1986 or Article 115 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or

e

under the law of a country or territory outside the United Kingdom circumstances corresponding to those mentioned in paragraph (a), (b), (c) or (d) exist.

9

Section 323(A1) of CTA 2009 applies for the interpretation of subsection (7)(b); and the rest of that section applies for the interpretation of subsection (8).

259NEDRelease of connected companies debts

1

This section is to be read with section 259NEB (relevant debt relief circumstances: introductory).

2

The circumstances in this section are—

a

the relevant release takes place in an accounting period for which—

i

an amortised cost basis of accounting is used in respect of the debtor relationship, and

ii

the debtor relationship is a connected companies relationship, and

b

the release is neither—

i

a deemed release, nor

ii

a release of relevant rights.

259NEERelease of connected companies debts during creditor's insolvency

1

This section is to be read with section 259NEB (relevant debt relief circumstances: introductory).

2

The circumstances in this section are—

a

the relevant release takes place in an accounting period for which an amortised cost basis of accounting is used in respect of the debtor relationship,

b

condition A, B, C, D or E in section 357 of CTA 2009 is met in relation to the payer,

c

immediately before the time when any of those conditions was first met the debtor relationship was a connected companies relationship, and

d

immediately after that time it was not such a relationship.

259NEFCorporate rescue: debt released shortly after connection arises

1

This section is to be read with section 259NEB (relevant debt relief circumstances: introductory).

2

The circumstances in this section are—

a

the relevant release takes place within 60 days of the payer and a payee becoming connected with one another (within the meaning of section 363 of CTA 2009), and

b

the corporate rescue conditions are met.

3

The corporate rescue conditions are—

a

that the payer and the payee became connected as a result of an arm's length transaction, and

b

immediately before the payer and the payee became connected it was reasonable to assume that, without the connection and any arrangements of which the connection forms part, there would be a material risk that at some point within the next 12 months the payee would have been unable to pay its debts.

4

For the purposes of subsection (3)(b), a payee is unable to pay its debts if—

a

it is unable to pay its debts as they fall due, or

b

the value of its assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.