Corporation Tax Act 2009 section 362A

Corporate rescue: debt released shortly after connection arises

Section 362A provides relief from a deemed taxable credit that would otherwise arise under section 362 when a creditor and debtor company become connected and the debt has been impaired, where the debtor is in serious financial difficulty and the debt is released shortly after the connection.

• Where section 362 would normally impose a deemed release credit on the debtor company, this section disapplies or reduces that credit if the creditor releases the debt within 60 days of the parties becoming connected
• The corporate rescue conditions require that the connection arose from an arm's length transaction and that, without the connection and related arrangements, there was a material risk the debtor would have been unable to pay its debts within the next 12 months
• If the entire debt is released within the 60-day window, section 362 is completely disapplied — no deemed release credit arises at all
• If only part of the debt is released within the 60-day window, the deemed release credit under section 362 is reduced by the amount actually released, down to a minimum of nil