On the disposal of the shares in a company, a seller may receive loan stock (loan notes) in the acquiring company as consideration (or part consideration) for the sale.

For tax purposes, loan notes are either qualifying corporate bonds (QCBs) or non-qualifying corporate bonds (non-QCBs). The expression ‘corporate bond’ is a general commercial term for securities issued by companies to raise debt finance and does not have any special tax significance except in the process of identifying QCBs and non-QCBs. The issue, transfer and redemption of loan notes do not generally give rise to any liability to stamp duty or stamp duty reserve tax.

The way in which the loan notes are treated for tax purposes depends on whether the loan notes are classified as QCBs or non-QCBs. HMRC needs to be satisfied that the issue of the loan note is not for the purposes of tax avoidance. Therefore, it is always advisable to seek clearance from HMRC when entering into