The meaning of ‘security’ comes up in a number of practical contexts, but the legislative definitions are difficult to apply in practice. It is therefore necessary to look at case law and HMRC guidance. In the context of a ‘debt on a security’, the key question is whether it is possible to realise or deal with the debt at a profit. This test can be helpfully illustrated by contrasting an intercompany balance to a bilateral loan, and by considering a debt on uncommercial terms. It is difficult to come up with an all-encompassing test for a ‘security’ outside the ‘debt on a security context’; however, key indicators include being able to deal with it at a profit, having the qualities of an investment and an obligation created by an instrument.
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The meaning of ‘security’ comes up in a number of practical contexts, but the legislative definitions are difficult to apply in practice. It is therefore necessary to look at case law and HMRC guidance. In the context of a ‘debt on a security’, the key question is whether it is possible to realise or deal with the debt at a profit. This test can be helpfully illustrated by contrasting an intercompany balance to a bilateral loan, and by considering a debt on uncommercial terms. It is difficult to come up with an all-encompassing test for a ‘security’ outside the ‘debt on a security context’; however, key indicators include being able to deal with it at a profit, having the qualities of an investment and an obligation created by an instrument.
If you are not a subscriber, subscribe now to read this content.
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