352A Exclusion of credits on reversal of disregarded loss
(1) If as a result of section 352 the debits brought into account by a company in respect of a loan relationship are reduced, no credit is to be brought into account for the purposes of this Part to the extent that it represents the reversal of so much of the loss as was not brought into account as a debit.
(2) Nothing in this section affects the credits to be brought into account for the purposes of this Part in respect of exchange gains or losses resulting from a debt.
352B Eliminating tax mismatch for loan relationships with qualifying link
(1) This section applies if—
(a) section 349 applies in respect of a loan relationship of a company for an accounting period (application of amortised cost basis to connected companies relationships),
(b) the company is a party to another loan relationship (“the external loan relationship”) in respect of which that section does not apply for the period,
(c) the external loan relationship is a debtor relationship dealt with in its accounts on the basis of fair value accounting, and
(d) the external loan relationship has a qualifying link with one or more other loan relationships of the company.
(2) For this purpose the external loan relationship has “a qualifying link” with one or more other loan relationships of the company if—
(a) each of those other loan relationships of the company is a loan relationship in respect of which section 349 applies for the accounting period, and
(b) taking those other loan relationships together, the money received by the company under the external loan relationship is wholly or mainly used to lend money under those other loan relationships.
(3) The credits and debits which are to be brought into account for the purposes of this Part in respect of the external loan relationship for the period are to be determined on an amortised cost basis of accounting.
(4) If a company has a hedging relationship between—
(a) a relevant contract (“the hedging instrument”), and
(b) the liability representing the external loan relationship,
it is to be assumed in applying the amortised cost basis of accounting for the purposes of subsection (3) that the hedging instrument has where possible been designated for accounting purposes as a fair value hedge of that loan relationship.
(1) This Chapter contains rules about impairment losses and releases of debts in the case of companies connected with other companies.
(2) In particular, see—
(a) sections 354 to 357 (which prevent debits in respect of impairment losses and release debits from being brought into account in the case of connected companies relationships, subject to some exceptions),
(b) sections 358 to 360 (which exclude credits in respect of the release of debts or the reversal of impairments from being brought into account in that case,subject to some exceptions), and
(c) sections 361 to 363 (which treat debt releases as occurring when impaired debts become held by companies which might otherwise benefit from the exclusion under section 358).
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) Section 466 (companies connected for an accounting period) applies for the purposes of sections 354 to 360.
(5) For the circumstances in which companies are connected for sections 361 and 362, see section 363.
(6) For the meaning of “impairment loss and release debit” see section 476(1).
354 Exclusion of debits for impaired or released connected companies debts
(1) The general rule is that no impairment loss or release debit in respect of a company's creditor relationship is to be brought into account for the purposes of this Part for an accounting period if section 349 (application of amortised cost basis to connected companies relationship) applies to the relationship for the period.
(2) That rule is subject to—
(a) section 356 (swapping debt for equity), and
(b) section 357 (insolvent creditors).
(2A) Where the carrying value of an asset representing the creditor relationship has at any time been adjusted as a result of the asset being the hedged item under a designated fair value hedge, the rule in subsection (1) does not prevent a credit or debit being brought into account for the purposes of this Part in respect of any reversal of that adjustment.
(3) Nothing in this section affects the debits to be brought into account for the purposes of this Part in respect of exchange gains or losses arising from a debt.
(1) This section applies if, in the case of a creditor relationship of a company—
(a) an impairment loss or release debit is excluded by section 354 from being brought into account for any accounting period, and
(b) there is a later accounting period for which the creditor relationship in respect of the debt is not a connected companies relationship.
(2) So far as any amount represents the impairment loss or release debit, no debit may be brought into account in respect of it—
(a) for the first accounting period within subsection (1)(b), or
(b) for any subsequent such accounting period.
356 Exception to section 354: swapping debt for equity
(1) An impairment loss or release debit in relation to a liability to pay any amount to a company (“the creditor company”) under its creditor relationship is not prevented from being brought into account by section 354 if conditions A, B and C are met.
(2) Condition A is that the creditor company treats the liability as discharged.
(3) Condition B is that it does so in consideration of—
(a) any shares forming part of the ordinary share capital of the company on which the liability would otherwise have fallen, or
(b) any entitlement to such shares.
(4) Condition C is that there would be no connection between the two companies for the accounting period in which the consideration is given if the question whether there is such a connection were determined by reference only to times before the creditor company—
(a) acquired possession of the shares, or
(b) acquired any entitlement to them.
(1) An impairment loss or release debit is not prevented from being brought into account by section 354 in relation to an amount accruing to a company (“the creditor”) if—
(a) condition A, B, C, D or E is met in relation to the creditor, and
(b) the amount accrues to the creditor at a time which is the relevant time for the condition in question.
(2) Condition A is that the creditor is in insolvent liquidation, and for this condition the relevant time is any time in the course of the winding up.
(3) Condition B is that the creditor is in insolvent administration, and for this condition the relevant time is any time in the course of the administration.
(4) Condition C is that the creditor is in insolvent administrative receivership, and for this condition the relevant time is any time when the appointment of the administrative receiver is in force.
(5) Condition D is that an appointment of a provisional liquidator is in force in relation to the creditor 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)), and for this condition the relevant time is any time when the appointment is in force.
(6) Condition E is that under the law of a country or territory outside the United Kingdom, circumstances exist corresponding to those described in condition A, B, C or D, and for this condition the relevant time is any time corresponding to that described in the case of the condition in question.
(7) Section 323 applies for interpreting this section as it applies for interpreting section 322(6).
358 Exclusion of credits on release of connected companies debts: general
(1) This section applies if—
(a) a liability to pay an amount under a debtor relationship of a company (“D”) is released, and
(b) the release takes place in an accounting period for which—
(i) an amortised cost basis of accounting is used in respect of the relationship, and
(ii) the relationship is a connected companies relationship.
(2) D is only required to bring a credit into account in respect of the release for the purposes of this Part if
(a) it is a deemed release, or
(b) it is a release of relevant rights.
(3) In subsection (2) “deemed release” means a release which is deemed to occur because of—
(a) section 361 (acquisition of creditor rights by connected company at undervalue), or
(b) section 362 (parties becoming connected where creditor's rights subject to impairment adjustment).
(4) For the purposes of this section “relevant rights” means rights of a company (“C”) that—
(a) were acquired by C, before the day on which F(No2)A 2015 was passed, in circumstances that, but for the application of the old corporate rescue exception or the old debt-for-debt exception, would have resulted in a deemed release under section 361(3), or
(b) were acquired by another company before that day in such circumstances and transferred to C by way of an assignment or assignments.
(4A) In subsection (4)(a)—
(a) “the old corporate rescue exception” means the exception in section 361A (as it had effect before F(No2)A 2015);
(b) “the old debt-for-debt exception” means the exception in section 361B (as it had effect before that Act).
(5) The amount of the credit that D is required to bring into account in respect of a release of relevant rights is—
(a) the amount of the discount received on the acquisition, less
(b) the sum of any credits brought into account in respect of that amount (whether in the accounting period in which the release takes place or in a previous accounting period) by C or, in a case within subsection (4)(b), by the company that acquired the rights or any company to which the rights were subsequently assigned.
(6) A reference in subsection (5) to the amount of the discount received on the acquisition is to the amount that would have been treated as released under section 361(4) on the acquisition, but for the application of the corporate rescue exception or the debt-for-debt exception.
(7) Where the carrying value of a liability representing the debtor relationship has at any time been adjusted as a result of the liability being the hedged item under a designated fair value hedge, this section does not prevent a credit or debit being brought into account for the purposes of this Part in respect of any reversal of that adjustment.
(8) Nothing in this section affects the credits or debits to be brought into account for the purposes of this Part in respect of exchange gains or losses arising from a debt.
359 Exclusion of credits on release of connected companies debts during creditor's insolvency
(1) This section applies if—
(a) a liability to pay an amount under a company's debtor relationship is released,
(b) the release takes place in an accounting period for which an amortised cost basis of accounting is used in respect of that relationship,
(c) condition A, B, C, D or E in section 357 is met in relation to the company releasing the amount,
(d) immediately before the time when any of those conditions was first met the relationship was a connected companies relationship, and
(e) immediately after that time it was not such a relationship.
(2) The company is not required to bring into account a credit in respect of the release for the purposes of this Part.
(3) Where the carrying value of a liability representing the debtor relationship has at any time been adjusted as a result of the liability being the hedged item under a designated fair value hedge, this section does not prevent a credit being brought into account for the purposes of this Part in respect of any reversal of that adjustment.
360 Exclusion of credits on reversal of impairments of connected companies debts
(1) If an impairment loss is prevented from being brought into account by section 354, no credit in respect of any reversal of the impairment may be brought into account for the purposes of this Part.
(2) Nothing in this section affects the credits to be brought into account for the purposes of this Part in respect of exchange gains or losses arising from a debt.
361 Acquisition of creditor rights by connected company at undervalue
(1) This section applies if—
(a) a company (“D”) is a party to a loan relationship as debtor,
(b) another company (“C”) becomes a party to it as creditor,
(c) immediately after it does so C and D are connected,
(d) in a case where the person from whom C acquires its rights under the loan relationship is a company, in the period of account in which C acquires them there is no connection between C and that company,
(e) the amount or value of any consideration given by C for the acquisition is less than the pre-acquisition carrying value (see subsection (5)), and
(f) the equity-for-debt exception (see section 361C) does not apply.
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) C is treated as releasing its rights under the loan relationship when it acquires them.
(4) The amount treated as released is the amount of the difference referred to in subsection (1)(e).
(5) In subsection (1)(e) “the pre-acquisition carrying value” means the amount which would be the carrying value of the liability under the loan relationship in D's accounts if a period of account had ended immediately before C became a party to it.
(6) For the purposes of subsection (5) the carrying value is determined taking no account of—
(a) accrued amounts, or
(b) amounts paid or received in advance.
(7) Subsections (3) and (4) are subject to section 361D (corporate rescue: debt released shortly after acquisition).
(1) For the purposes of section 361 the “equity-for-debt exception” applies if the following two conditions are met.
(2) The first condition is that the acquisition is an arm's length transaction.
(3) The second condition is that the consideration given by C for the acquisition consists only of—
(a) shares forming part of the ordinary share capital of C,
(b) shares forming part of the ordinary share capital of a company connected with C, or
(c) an entitlement to shares within paragraph (a) or (b).
361D Corporate rescue: debt released shortly after acquisition
(1) This section applies if—
(a) the case is one in which section 361 would otherwise apply,
(b) within 60 days after C becomes a party to the loan relationship as creditor, C or a company connected with C releases D's liability to pay an amount under the loan relationship, and
(c) the corporate rescue conditions are met.
(2) If the release is of the whole debt, section 361 does not apply to the acquisition of the rights by C.
(3) If the release is of part of the debt, the amount that C is treated by section 361 as having released when it acquired the rights under the loan relationship is reduced (but not below nil) by the amount that is actually released as mentioned in subsection (1)(b).
(4) The corporate rescue conditions are—
(a) that the acquisition by C of its rights under the loan relationship is an arm's length transaction,
(b) that immediately before C became a party to the loan relationship as creditor, it was 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 have been unable to pay its debts.
(5) For the purposes of subsection (4)(b), a company is unable to pay its debts if—
(a) it is unable to pay its debts as they fall due, or
(b) the value of the company's assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.
362 Parties becoming connected where creditor's rights subject to impairment adjustment etc
(1) This section applies if—
(a) a company (“D”) is a party to a loan relationship as debtor, and
(b) another company (“C”) which—
(i) is a party to the loan relationship as creditor, and
(ii) is not connected with D,
becomes connected with D, ...
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) C is treated as releasing its rights under the loan relationship when C and D become connected.
(3) The amount treated as released is the amount (if any) by which the pre-connection carrying value in D's accounts exceeds the pre-connection carrying value in C's accounts.
(4) In subsection (3)—
“the pre-connection carrying value in D's accounts” means the amount that would be the carrying value of the liability representing the loan relationship in D's accounts if a period of account had ended immediately before C and D became connected, and
“the pre-connection carrying value in C's accounts” means—
in any case where C was a party to the loan relationship as creditor on the last day of the period of account ending immediately before the one in which C and D became connected, the cost of the asset representing the loan relationship which would be given on that day on an amortised cost basis of accounting, and
in any other case, the amount or value of any consideration given by C for the acquisition of the asset representing the loan relationship.
(5) For the purposes of subsection (4) no account is to be taken of—
(a) accrued amounts, or
(b) amounts paid or received in advance, ...
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) Subsections (2) and (3) are subject to section 362A (corporate rescue: debt released shortly after connection arises).
362A Corporate rescue: debt released shortly after connection arises
(1) This section applies if—
(a) the case is one in which section 362 would otherwise apply,
(b) within 60 days after C and D become connected, C releases D's liability to pay an amount under the loan relationship, and
(c) the corporate rescue conditions are met.
(2) If the release is of the whole debt, section 362 does not apply by reason of C and D becoming connected.
(3) If the release is of part of the debt, the amount that C is treated by section 362 as having released when it became connected with D is reduced (but not below nil) by the amount actually released.
(4) The corporate rescue conditions are—
(a) that C and D became connected as a result of an arm's length transaction, and
(b) that immediately before C and D became connected it was reasonable to assume that, without the connection and any arrangements of which the connection forms part, there would be a material risk that at some time within the next 12 months D would have been unable to pay its debts.
(5) For the purposes of subsection (4)(b), a company is unable to pay its debts if—
(a) it is unable to pay its debts as they fall due, or
(b) the value of the company's assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.
(1) For the purposes of sections 361 to 362A there is a connection between two companies at any time if condition A or B is met at that time.
(2) Condition A is that one company has control of the other.
(3) Condition B is that both companies are under the control of the same person (but see subsection (6)).
(4) For the purposes of sections 361 to 362A there is a connection between two companies in a period of account if there is a connection between them (within subsection (1)) at any time in the period.
(5) Section 472 (meaning of “control”) applies for the purposes of this section.
(6) Condition B is not taken to be met just because two companies have been under the control of—
(a) the Crown,
(b) a Minister of the Crown,
(c) a government department,
(d) a Northern Ireland department,
(e) a foreign sovereign power, or
(f) an international organisation.
(7) Section 468 (connection between companies to be ignored in some circumstances) applies for the purposes of this section as it applies for the purposes of the provisions which apply section 466, taking references in sections 468 and 469 to the accounting period as references to the period of account.
(8) For the meaning of “international organisation”, see section 476(2) and (3).
(1) This section applies in any case where arrangements are entered into and the main purpose, or one of the main purposes, of any party in entering into them (or any part of them) is—
(a) to avoid an amount being treated as released under section 361 or 362, or
(b) to reduce the amount which is treated as released under section 361 or 362.
(2) The arrangements (or part of the arrangements) are not to achieve that effect (so that an amount, or a greater amount, falls to be treated as released under section 361 or 362).
(3) In this section “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
(1) This Chapter applies if—
(a) there is (or was) a relevant consortium creditor relationship (see subsection (2)), and
(b) either—
(i) an impairment loss is or has been brought into account for the purposes of this Part for any group accounting period by the creditor, or
(ii) a debit in respect of a release of liability under the relationship is or has been so brought into account.
(2) For the purposes of this Chapter a relationship is a relevant consortium creditor relationship if—
(a) it is a creditor relationship of—
(i) a company (the “member company”), which is a member of a consortium by which a consortium company is owned, or
(ii) a company (a “group member”) which is a member of the same group of companies as the member company but is not itself a member of the consortium, and
(b) the consortium company or, if that company is a holding company, a consortium company which is a subsidiary of that company is (or was) the debtor (the “debtor consortium company”).
(3) The provisions of this Chapter—
(a) reduce debits for impairment losses and release debits under relevant consortium creditor relationships where an amount surrendered as group relief by the consortium company is claimed by a member company or group member (see section 365),
(b) provide for a corresponding reduction in credits in respect of such relationships where a reduction within paragraph (a) has occurred (see section 367),
(c) reduce claims for group relief where debits within paragraph (a) for earlier group accounting periods exceed reductions within paragraph (b) (see section 368), and
(d) provide for such claims to be carried forward where they exceed such debits (see section 369).
(4) In this Chapter “release debit” means a debit in respect of a release of liability under a relevant consortium creditor relationship, and
“group relief” means—
group relief under Part 5 of CTA 2010 (see section 97(2) of that Act), and
group relief for carried-forward losses under Part 5A of CTA 2010 (see section 188AA(4) of that Act).
(5) If section 143, 144 or 188DH of CTA 2010 (which limit the amount of group relief to be given in certain cases involving a consortium) applies, effect must be given to that section before effect is given to this Chapter.
(6) Expressions defined in this section have the same meaning in the other provisions of this Chapter, and sections 370 and 371 also apply for the interpretation of this Chapter.
(7) For the meaning of “impairment loss” see section 476(1).
365 Reduction of impairment loss debits where group relief claimed
(1) This section applies for any group accounting period for which there is a net consortium debit.
(2) For the purposes of this Chapter there is a net consortium debit for a group accounting period if—
(a) the total of the impairment losses and release debits brought into account for that period in respect of relevant consortium creditor relationships by—
(i) the member company, and
(ii) every group member,
exceeds
(b) the total credits so brought into account by them in connection with debts owed by the companies which are the debtor consortium companies in respect of those relationships.
(3) The net consortium debit is equal to that excess.
(4) If there is a claim for that group accounting period by the member company or a group member for group relief in respect of an amount which may be surrendered as group relief by the debtor consortium companies, the debits brought into account in respect of the impairment losses and the release debits mentioned in subsection (2)(a) are reduced.
(5) The amount of reduction in the case of each of the debits referred to in subsection (4) (“the relevant debits”) is calculated as follows.
Step 1
Find the total amount which—
(a) may be surrendered as group relief by the debtor consortium companies, and
(b) is claimed as group relief for the group accounting period by the member company or any group member.
Step 2
If the amount found at Step 1 does not exceed the net consortium debit, apportion the amount found at Step 1 between the relevant debits in proportion to their respective amounts.
If the amount found at Step 1 exceeds the net consortium debit, apportion so much of the amount found at Step 1 as does not exceed it between the relevant debits in proportion to their respective amounts.
(6) This section is subject to section 366.
366 Effect where credit for release brought into account on amortised cost basis
(1) This section applies if—
(a) a company releases liability under a relevant consortium creditor relationship of the company (“the release amount”), and
(b) the debtor consortium company brings into account an amount in respect of the release for any accounting period in accordance with an amortised cost basis of accounting.
(2) An amount equal to the release amount is treated for the purposes of this Chapter as not being a debit brought into account for that period in relation to the relevant consortium creditor relationship.
367 Reduction of credits exceeding impairment losses
(1) This section applies if, apart from this section, for any group accounting period—
(a) the total of the impairment losses and release debits brought into account for that period in respect of relevant consortium creditor relationships by—
(i) the member company, and
(ii) every group member,
is less than
(b) the total credits so brought into account by them in connection with debts owed by the companies which are the debtor consortium companies in respect of those relationships.
(2) Those credits are reduced (but not below nil) in accordance with subsection (3).
(3) The amount of reduction in the case of each credit is calculated as follows.
Step 1
Find the total amount by which the debits in respect of the relationships for previous group accounting periods have been reduced under section 365(4).
Step 2
Deduct the total amount by which credits have previously been reduced under this section from the amount found at Step 1.
Step 3
Apportion the amount found at Step 2 between the credits in proportion to their respective amounts.
368 Reduction of claims where there are earlier net consortium debits
(1) This section applies if—
(a) for any group accounting period there is a claim by the member company or a group member for group relief in respect of an amount which may be surrendered as group relief by debtor consortium companies, and
(b) the total amount of the net consortium debits for earlier group accounting periods in respect of the relevant consortium creditor relationships exceeds any reductions in respect of those debits falling to be made under section 365(4).
(2) In this section that excess is referred to as “the unreduced debits amount”.
(3) If—
(a) the claim is the only claim for that period, and
(b) it exceeds the unreduced debits amount,
the claim is reduced by the unreduced debits amount.
(4) If—
(a) the claim is not the only claim for that period, and
(b) the total of the claims exceeds the unreduced debits amount,
the claim is reduced by the same proportion of the unreduced debits amount as the claim bears to that total.
(5) In any other case, the claim is reduced to nil.
369 Carry forward of claims where there are no net consortium debits
(1) This section applies if for any group accounting period there is—
(a) a claim by the member company or a group member for group relief in respect of an amount which may be surrendered as group relief by debtor consortium companies (as reduced under section 368, if it applies), and
(b) no net consortium debit in respect of the relevant consortium creditor relationships.
(2) The claim (as so reduced) is carried forward and treated for the purposes of section 365—
(a) as increasing any such claim for group relief made by the claimant company for its next accounting period, or
(b) if apart from this subsection there would be no such claim, as being such a claim.
(1) In this Chapter “group accounting period” means—
(a) any accounting period of the member company beginning on or after 1 October 2002, or
(b) any accounting period of a group member which—
(i) begins on or after that date, and
(ii) corresponds to such an accounting period of the member company.
(2) Any such accounting period of the member company and any such corresponding accounting periods of group members are treated for the purposes of this Chapter as being the same accounting period.
(3) For the purposes of this Chapter an accounting period of a group member corresponds to an accounting period of the member company if condition A, B or C is met.
(4) Condition A is that the periods coincide.
(5) Condition B is that the accounting period of the member company includes more than half of the accounting period of the group member.
(6) Condition C is that—
(a) the accounting period of the member company includes part of the accounting period of the group member, and
(b) the remainder of that period is not within any accounting period of the member company.
(1) In this Chapter—
“consortium company” means a trading company, as defined by section 185(1) of CTA 2010, that is owned by a consortium or a holding company that is so owned,
“debtor consortium company” has the same meaning as in section 364 (see section 364(2)),
“group accounting period” is to be read in accordance with section 370,
“group member” has the same meaning as in section 364 (see section 364(2)),
“group relief” has the meaning given by section 364(4),
“holding company” has the same meaning as in Part 5 of CTA 2010 (see section 185(2) of that Act),
“member”, in relation to a consortium, has the same meaning as in Part 5 of CTA 2010 (see section 153(2) of that Act),
“member company” has the same meaning as in section 364 (see section 364(2)),
“net consortium debit” is to be read in accordance with section 365(2) and (3),
“relevant consortium creditor relationship” is to be read in accordance with section 364(2), and
“subsidiary”, in relation to a company which is a holding company, means a trading company (as defined by section 185(1) of CTA 2010) that, by reference to that holding company, is owned by a consortium by virtue of section 153(3) of that Act.
(2) Any reference in this Chapter to a company being owned by a consortium is to be read in accordance with section 153 of CTA 2010.
(3) Any reference in this Chapter to two companies being members of the same group of companies is a reference to those companies being members of the same group of companies for the purposes of Part 5 of CTA 2010 (group relief) (see section 152 of that Act).
(1) This Chapter makes provision about the debits to be brought into account for the purposes of this Part in cases where certain conditions relating to interest that is not paid or is paid late are met and there is a connection between the parties to the loan relationship.
(2) For those conditions and the rule that applies in those cases, see section 373 (late interest treated as not accruing until paid in some cases).
(3) For the kinds of connections where the rule applies, see—
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) section 375 (loans to close companies by participators etc), and
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d) section 378 (loans by trustees of occupational pension schemes).
(4) For the meaning of “standing in the position of a creditor” in this Chapter, see section 379(1) (persons indirectly standing in the position of creditor).
373 Late interest treated as not accruing until paid in some cases
(1) Debits relating to interest payable under a company's debtor relationship are to be brought into account for the purposes of this Part on the assumption that the interest does not accrue until it is paid if—
(a) conditions A and B are met, and
(b) the case is within section 375 or 378.
(2) Condition A is that the interest is not paid within the period of 12 months following the end of the accounting period in which it would be treated as accruing apart from subsection (1).
(3) Condition B is that credits representing the full amount of the interest are not brought into account for the purposes of this Part in respect of the corresponding creditor relationship for any accounting period.
(4) For the meaning of “corresponding creditor relationship” in cases where persons indirectly stand in the position of creditor, see section 379(2).
(5) References in this Chapter to “the actual accrual period” are references to the accounting period in which the interest would be treated as accruing apart from subsection (1).
(1) The case to which this section applies is where—
(a) there is a time in the actual accrual period when the close company conditions are met, and
(b) neither the CIS-based close company conditions nor the CIS limited partnership conditions are met
and, where subsection (4A) applies, the non-qualifying territory condition is met.
(2) The close company conditions are that—
(a) the company which has the debtor relationship (“D”) is a close company, and
(b) a person (“C”) standing in the position of creditor as respects the loan relationship is—
(i) a participator in D,
(ii) the associate of a person who is participator in D,
(iii) a company of which a participator in D has control,
(iv) a company in which a participator in D has a major interest,
(v) a person who controls a company which is a participator in D,
(vi) the associate of a person within sub-paragraph (v), or
(vii) a company controlled by a person within sub-paragraph (v).
(3) The CIS-based close company conditions are that—
(a) D is a CIS-based close company at all times when the close company conditions are met,
(b) C is not resident for tax purposes in a non-qualifying territory at any such time, and
(c) D is a small or medium-sized enterprise for the actual accrual period.
(4) The CIS limited partnership conditions are that—
(a) the debt is one which is owed to, or to persons acting for, a CIS limited partnership,
(b) no member of that partnership is resident for tax purposes in a non-qualifying territory at any time in the actual accrual period,
(c) D has received written notice from the partnership containing information from which it appears that the condition in paragraph (b) is met, and
(d) D is a small or medium-sized enterprise for the actual accrual period.
(4A) This subsection applies if C is a company; and the non-qualifying territory condition is that C is—
(a) resident for tax purposes in a non-qualifying territory at any time in the actual accrual period, or
(b) effectively managed in a non-taxing non-qualifying territory at any such time.
(5) Section 376 applies for the interpretation of this section.
(1) For the purposes of section 375 and this section, Chapter 2 of Part 10 of CTA 2010 (meaning of “close company”) applies with the omission of section 442(a) (exclusion of non-resident companies).
(2) A person who is a participator in a company which controls another company is treated for the purposes of section 375 and this section as being a participator in that other company also.
(3) Subject to that, in section 375 and this section “participator”, in relation to a company, means a person who is a participator in the company within the meaning given by section 454 of CTA 2010, but not a person who is such a participator just because of being a loan creditor of the company.
(4) Section 472 (meaning of “control”) applies for the purposes of section 375 and this section.
(5) In section 375—
“CIS-based close company” means a company which would not be a close company apart from the rights and powers of one or more partners in a CIS limited partnership being attributed to another of the partners under section 451(4) to (6) of CTA 2010 because of section 448(1)(a) of that Act,
“CIS limited partnership” means a limited partnership—
which is a collective investment scheme, or
which would be a collective investment scheme if it were not a body corporate,
“non-qualifying territory” has the meaning given by section 173 of TIOPA 2010,
“resident for tax purposes” means liable, under the law of the non-qualifying territory, to tax there by reason of domicile, residence or place of management, and
“small or medium-sized enterprise” has the meaning given by section 172 of TIOPA 2010.
(6) For the purposes of section 375, a non-qualifying territory is “non-taxing” if companies are not under its law liable to tax by reason of domicile, residence or place of management.
378 Loans by trustees of occupational pension schemes
(1) The case to which this section applies is where—
(a) the loan is one made by trustees of an occupational pension scheme, and
(b) condition A, B or C is met.
(2) Condition A is that there is a time in the actual accrual period when the company which has the debtor relationship (“D”) is the employer of employees to whom the scheme relates.
(3) Condition B is that there is a connection between D and such an employer for the actual accrual period.
(4) Condition C is that a company is such an employer and there is a time in the actual accrual period when—
(a) D has a major interest in that company, or
(b) that company has a major interest in D.
(5) In this section “occupational pension scheme” has the meaning given in section 150(5) of FA 2004.
(6) Section 466 (companies connected for an accounting period) applies for the purposes of this section.
379 Persons indirectly standing in the position of creditor
(1) For the purposes of this Chapter a person is treated as standing in the position of a creditor as respects a loan relationship if the person indirectly stands in that position by reference to a series of loan relationships or relevant money debts.
(2) If—
(a) a person (“C”) indirectly stands in the position of creditor as respects a loan relationship by reference to such a series of relationships or debts, and
(b) section 373 (late interest treated as not accruing until paid in some cases) applies in relation to the debtor relationship because of subsection (1),
the reference in section 373(3) to the corresponding creditor relationship is a reference to C's creditor relationship.
(3) In subsection (1) “relevant money debt” means a money debt which would be a loan relationship if a company directly stood in the position of creditor or debtor.
(1) This section applies if—
(a) a trade or business is carried on by a firm,
(b) any of the partners in the firm is a company (a “company partner”), and
(c) a money debt is owed by or to the firm.
(2) In calculating the profits and losses of the trade or business for corporation tax purposes under section 1259 (calculation of firm's profits or losses), no credits or debits may be brought into account under this Part—
(a) in relation to the money debt, or
(b) in relation to any loan relationship that would fall to be treated for the purposes of the calculation as arising from the money debt.
(3) Instead, each company partner must bring credits and debits into account under this Part in relation to the debt or relationship for each of its accounting periods in which the conditions in subsection (1) are met.
(4) The following provisions of this Chapter contain special rules about the credits and debits to be brought into account under subsection (3)—
(a) section 381 (determinations of credits and debits by company partners: general),
(b) section 382 (company partners using fair value accounting),
(c) section 383 (lending between partners and the partnership),
(d) section 384 (treatment of exchange gains and losses), and
(e) section 385 (company partners' shares where firm owns deeply discounted securities).
(5) In those provisions “company partner” has the same meaning as in this section.
381 Determinations of credits and debits by company partners: general
(1) The credits and debits to be brought into account under section 380(3) are to be determined separately for each company partner as follows.
(2) The money debt owed by or to the firm is treated as if—
(a) it were owed by or, as the case may be, to the company partner, and
(b) it were so owed for the purposes of the trade or business which the company partner carries on.
(3) If the money debt arises from a transaction for the lending of money—
(a) it continues to be treated as so arising, and
(b) accordingly the company partner is treated as having a loan relationship.
(4) Anything done by or in relation to the firm in connection with the money debt is treated as done by or in relation to the company partner.
(5) The credits and debits in the case of each company partner are the partner's appropriate share of the total credits and debits determined in accordance with subsections (2) to (4) (without any reduction for the fact that the debt is treated as owed by or to each company partner).
(6) A company partner's “appropriate share” is the share that would be apportioned to it on the assumption in subsection (7).
(7) The assumption is that the total credits and debits determined in accordance with subsections (2) to (4) are apportioned between the partners in the shares in which any profit or loss would be apportioned between them in accordance with the firm's profit-sharing arrangements.
(1) This section applies if a company partner uses fair value accounting in relation to its interest in the firm.
(2) The credits and debits to be brought into account by the company partner under section 380(3) are to be determined on the basis of fair value accounting.
(1) This section applies if—
(a) the money debt owed by or to the firm arises from a transaction for the lending of money, and
(b) there is a time in an accounting period of a company partner (“the relevant accounting period”) when conditions A, B and C are met.
(2) Condition A is that—
(a) if the debt is owed by the firm, the company partner stands in the position of a creditor and accordingly has a creditor relationship, and
(b) if the debt is owed to the firm, the company partner stands in the position of a debtor and accordingly has a debtor relationship.
(3) Condition B is that the company partner controls the firm either alone or taken together with one or more other company partners connected with the company partner (see subsection (7)).
(4) Condition C is that the company partner or any other company partner is treated under section 381(3) as if—
(a) it had the debtor relationship which corresponds to the creditor relationship mentioned in subsection (2)(a), or
(b) it had the creditor relationship which corresponds to the debtor relationship mentioned in subsection (2)(b).
(5) If this section applies, for the purposes of this Part for the relevant accounting period there is taken to be a connection between—
(a) the company partner, and
(b) each company partner that is within subsection (4) (including the company partner itself if it is within that subsection),
as a result of one of them having control of the other at a time in the period for the purposes of section 466(2).
(6) The provisions of this Part about connected companies relationships apply accordingly.
(7) For the purposes of subsection (3), one company partner is connected with another at any time in an accounting period if at that or any other time in the accounting period—
(a) one controls the other, or
(b) both are under the control of the same person.
(8) Section 472 (meaning of “control”) applies for the purposes of subsection (7) (but see section 1124 of CTA 2010 for the meaning of “control” in subsection (3)).
(1) Whether credits and debits in respect of exchange gains and losses are to be brought into account by a company partner under this Chapter as a result of section 328(1), or that section is disapplied by section 328(3), depends on the firm's accounts.
(2) Section 328(3) applies only so far as exchange gains and losses are recognised in the firm's statement of total recognised gains and losses, statement of recognised income and expense, statement of changes in equity or statement of income and retained earnings.
(3) Accordingly, a company partner must bring credits and debits into account under this Chapter in respect of exchange gains and losses which are not so recognised.
(4) For the meaning of references in this section to exchange gains and losses, see section 475.