Taxation (International and Other Provisions) Act 2010 section 259NEC

Release of debts

Section 259NEC sets out the specific circumstances in which the release of a debt qualifies as a "relevant debt relief circumstance" for the purposes of the hybrid mismatch rules, provided the debtor uses an amortised cost basis of accounting.

• The debt release must occur in an accounting period where the debtor relationship is accounted for on an amortised cost basis, and at least one of five qualifying conditions (A to E) must be met.
• Qualifying conditions include the release being part of a statutory insolvency arrangement (Condition A), a debt-for-equity swap involving ordinary shares in the debtor (Condition B), or the debtor meeting one of several defined insolvency conditions provided the relationship is not between connected companies (Condition C).
• A release also qualifies if it results from a bank resolution action, such as a mandatory reduction instrument or the exercise of stabilisation powers under the Banking Act 2009 (Condition D).
• Finally, where the release is a genuine (not deemed) release and, immediately before it takes place, there is a material risk that the debtor would be unable to pay its debts within the next 12 months without the release or related arrangements, the release also qualifies (Condition E).