CG53495 - Securities: debts: general points: bundle of rights

In the case of Cleveleys Investment Trust Co v CIR, 47TC300, there had been an arrangement between that company and another (Falkirk) that

• a loan would be made by Cleveleys to Falkirk, and
• on a capital reconstruction of Falkirk the loan would be discharged in return for an allotment of 51 per cent of the share capital in Falkirk to Cleveleys.

Falkirk however went into liquidation before any capital reconstruction took place. Cleveleys wrote off the debt, and sought a capital loss in respect of it.

The Court of Session decided, by a majority, that the arrangements gave rise to a `bundle of rights’, which included the rights to shares in a reorganisation of Falkirk’s share capital. The asset which Cleveleys held was not simply a debt, but incorporeal property, which fell within the generality of chargeable assets (now TCGA92/S21 (1)(a) ). It was not possible to separate the loan element from the other elements, and the general restriction on debts (now TCGA92/S251 (1) ) had no application. The whole of the loss suffered by Cleveleys was, therefore, allowable.

The decision in the Cleveleys case predated the specific provisions concerning loss relief for loans to traders (now TCGA92/S253), which may be relevant where losses are now claimed in situations in this kind. See CG65900+.