Debt securities that are exempt from tax on chargeable gains so that their disposal does not give rise to any chargeable gain or allowable loss for the purposes of capital gains tax, other than any chargeable gain that was held over on acquisition of the QCBs in exchange for shares.

If an individual or trustee receives QCBs as consideration for shares in a takeover or reorganisation, unless an election is made in conjunction with a claim for business asset disposal relief, the gain on the sale of the shares is calculated but will be held over and will not be brought into charge until the QCBs are disposed of.

For corporation tax purposes, with certain exceptions, the definition of a QCB includes any asset representing a loan relationship (section 302, Corporation Tax Act 2009) of the company.

For other noteholders, a QCB must be a debt security which satisfies each of the following criteria:

(Sections 115 and 117, Taxation of Chargeable Gains Act 1992.)

All deeply discounted securities are QCBs which means that no loss made on a deeply discounted security is allowable for the purposes of tax on chargeable gains.