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Tax, Accounting & Legal
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TMI Tax Doctor: Debt Restructuring

Welcome to the TMI Tax Doctor, which is designed to look at some of the tax issues associated with treasury globally. In this first column I answer a UK tax-related question around debt restructurings. I also address a second question relating to the key tax issues to consider when assessing potential jurisdictions for a group treasury and finance company.

Q1: I am discussing a debt for equity swap with my lenders; what are the key UK tax considerations on the treatment of any accounting gain recognised on a debt release as a consequence of the swap?

Simple waivers or releases of debts by lenders prima facie result in an immediate UK tax charge for the borrower.

However credits arising in respect of debt releases in borrowing companies that have issued equity to lenders are generally exempt from being taxed, but this does not apply to all types of shares.