Corporation Tax Act 2009 section 322

Release of debts: cases where credits not required to be brought into account

Section 322 sets out the circumstances in which a debtor company does not have to recognise a taxable credit when a liability under a loan relationship is released, provided an amortised cost basis of accounting is used.

• When a debt is released, the resulting accounting credit is normally taxable — but this section provides five exemptions (Conditions A to E) where no such credit needs to be brought into account
• Exemptions cover releases as part of statutory insolvency arrangements, debt-for-equity swaps, releases where the debtor is formally insolvent (and the debt is not with a connected company), releases under banking resolution powers, and releases where the company faces a material risk of being unable to pay its debts within 12 months
• The insolvency conditions include insolvent liquidation, insolvent administration, insolvent administrative receivership, appointment of a provisional liquidator, or equivalent proceedings under the law of a country outside the United Kingdom
• Separate rules in sections 358 and 359 deal with additional cases where credits on debt releases between connected companies are excluded