Section 322 Release of debts: cases where credits not required to be brought into account
United Kingdom
This section applies if—
a liability to pay an amount under a company's debtor relationship is released, and
the release takes place in an accounting period for which an amortised cost basis of accounting is used in respect of that relationship.
Condition A is that the release is part of a statutory insolvency arrangement.
Condition B is that the release is F3not a release of relevant rights and is—
in consideration of shares forming part of the ordinary share capital of the debtor company, or
in consideration of any entitlement to such shares.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Condition C is that—
the debtor company meets one of the insolvency conditions (see subsection (6)), and
the debtor relationship is not a connected companies relationship (see section 348).
Condition D is that the liability is released in consequence of F6the making of a mandatory reduction instrument or a third country instrument or the exercise of a stabilisation power under Part 1 of the Banking Act 2009 F7or the exercise of a third-country instrument or a stabilisation power under Schedule 11 to the Financial Services and Markets Act 2023.
Condition E is that—
the release is neither a deemed release, as defined by section 358(3), nor a release of relevant rights, and
immediately before the release, it is reasonable to assume that, without the release and any arrangements of which the release forms part, there would be a material risk that at some time within the next 12 months the company would be unable to pay its debts.
For the purposes of this section a company meets the insolvency conditions if—
it is in insolvent liquidation,
it is in insolvent administration,
it is in insolvent administrative receivership,
an appointment of a provisional liquidator is in force in relation to the company under section 135 of the Insolvency Act 1986 (c. 45) or Article 115 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or
under the law of a country or territory outside the United Kingdom circumstances corresponding to those mentioned in paragraph (a), (b), (c) or (d) exist.
In subsections (4) and (5B)(a), “relevant rights” has the same meaning as in section 358.
Section F10323(A1) applies for the interpretation of subsection (5B)(b); and the rest of section 323 applies for the interpretation of subsection (6).
For further cases where no credit in respect of the release is to be brought into account, see—
section 358 (exclusion of credits on release of connected companies debts: general), and
section 359 (exclusion of credits on release of connected companies debts during creditor's insolvency).
Annotations
Textual amendments
- F1
Words in s. 322(2) substituted (with effect in accordance with s. 26(4) of the amending Act) by Finance Act 2014 (c. 26), s. 26(2)
- F2
Word in s. 322(2) substituted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 16(2)
- F3
Words in s. 322(4) inserted (with effect in accordance with Sch. 15 para. 3(1) of the amending Act) by Finance Act 2010 (c. 13), Sch. 15 para. 1(2) (with Sch. 15 para. 4)
- F4
S. 322(4A) omitted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by virtue of Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 16(3)
- F5
S. 322(5A) inserted (with effect in accordance with s. 26(4) of the amending Act) by Finance Act 2014 (c. 26), s. 26(3)
- F6
Words in s. 322(5A) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 123
- F7
Words in s. 322(5A) inserted (31.12.2023) by The Resolution of Central Counterparties (Modified Application of Corporate Law and Consequential Amendments) Regulations 2023 (S.I. 2023/1313), regs. 1(2), 12
- F8
S. 322(5B) inserted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 16(4)
- F9
S. 322(6A) inserted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 16(5)
- F10
Words in s. 322(7) inserted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 16(6)
Notes on Part 5
Modifications
- C1
Pt. 5 applied (with effect in accordance with Sch. 24 paras. 13-16 of the amending Act) by Finance Act 2009 (c. 10), Sch. 24 para. 15(2)(3)
- C2
Pt. 5 applied (with modifications) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 990(5), 1184(1) (with Sch. 2)
- C3
Pt. 5 modified (15.11.2011 for specified purposes, 30.3.2012 for E.W.) by Localism Act 2011 (c. 20), ss., 240(5)(o), Sch. 24 para. 5; S.I. 2012/628, art. 3(b)
- C4
Pt. 5 modified (1.4.2012) by Budget Responsibility and National Audit Act 2011 (c. 4), s. 29, Sch. 4 para. 2; S.I. 2011/2576, art. 5
- C5
Pt. 5 modified (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 88(1)(2)(7) (with s. 147, Sch. 17)
- C6
Pt. 5 modified (30.9.2013) by The BRB (Residuary) Limited (Tax Consequences) Order 2013 (S.I. 2013/2242), arts. 1, 7
- C7
Pt. 5 modified (with effect in accordance with reg. 1(2)(3) of the amending S.I.) by The Taxation of Regulatory Capital Securities Regulations 2013 (S.I. 2013/3209), regs. 1(1), 11(3)-(6)
- C8
Pt. 5 modified by 2010 c. 4, s. 356NC(1)-(4) (as inserted (1.4.2014) by Finance Act 2014 (c. 26), Sch. 16 paras. 4, 6)
- C9
Pt. 5 modified by 2010 c. 4, s. 356NB(1)-(4) (as inserted (1.4.2014) by Finance Act 2014 (c. 26), Sch. 16 paras. 4, 6)
- C10
Pt. 5 modified by 2007 c. 3, s. 809FZZ(9) (as inserted (with effect in accordance with s. 37(4) of the amending Act) by Finance Act 2016 (c. 24), s. 37(2))
- C11
Pt. 5 modified by 2010 c. 4, s. 676AG(1) (as inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 75)
- C12
Pt. 5 modified (for the tax year 2026-27 and subsequent tax years (but in relation to investment management services whenever performed)) by 2005 c. 5, Sch. A1 para. 35(7) (as inserted by Finance Act 2026 (c. 11), s. 58(6), Sch. 11 para. 1)