Finance Act 1996

Transactions not at arm’s length

11 (1) Subject to sub-paragraphs (2) and (3) below, where—

(a) debits or credits in respect of a loan relationship of a company fall to be brought into account for the purposes of this Chapter in accordance with an authorised accounting method,

(b) those debits or credits relate to amounts arising from, or incurred for the purposes of, a related transaction, and

(c) that transaction is not a transaction at arm’s length,

the debits or credits given by that method shall be determined on the assumption that the transaction was entered into on the terms on which it would have been entered into between independent persons.

(2) Sub-paragraph (1) above shall not apply to debits arising from the acquisition of rights under a loan relationship where those rights are acquired for less than market value.

(3) Sub-paragraph (1) above does not apply—

(a) in the case of any related transaction between two companies that are members of the same group; or

(b) in relation to a member of a group of companies, in the case of any transaction which is part of a series of transactions having the same effect as a related transaction between two members of the same group.

(4) In this paragraph “related transaction” has the same meaning as in section 84 of this Act.

(5) Section 170 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (groups etc.) shall apply for the interpretation of this paragraph as it applies for the interpretation of sections 171 to 181 of that Act.