Section 178
SCHEDULE 37Loan relationships: amendments
Part 1Amendments to Schedule 9 to the Finance Act 1996
Introductory
1Schedule 9 to the Finance Act 1996 (c. 8) (loan relationships: special computational provisions) is amended as follows.
Late interest
2(1)Paragraph 2 is amended as follows.
(2)After sub-paragraph (5) insert—
“(5A)A person who is a participator in a company which controls another company shall be treated for the purposes of this paragraph as also being a participator in that other company.”.
(3)In sub-paragraph (6), in the definition of “participator” (which is expressed to have effect in relation to a close company) omit “close”.
(4)The amendments made by this paragraph have effect in relation to interest which would, apart from paragraph 2 of Schedule 9 to the Finance Act 1996 (c. 8), be treated as accruing on or after 9th April 2003.
Continuity of treatment: groups etc
3(1)Paragraph 12 is amended as follows.
(2)In sub-paragraph (2) (determination of credits and debits to be brought into account) in paragraph (a) (disregard of the transaction or series of transactions except for certain purposes) after “except” insert—
“(i)for the purpose of determining the debits or credits to be brought into account in respect of exchange gains or losses and identifying the company which is to bring them into account; or
(ii)”.
(3)In paragraph (b) of that sub-paragraph (transferor and transferee deemed to be the same person, except for that purpose) for “that purpose” substitute “those purposes”.
(4)In sub-paragraph (2A) (amount to be brought into account where transferor company uses authorised mark to market basis of accounting) for paragraph (a) substitute—
“(a)the amount to be brought into account by the transferor company in respect of the transaction, the result of the series of transactions, or the transfer must be—
(i)where an asset is to be brought into account, the fair value of the asset, or of the rights under or interest in the asset, and
(ii)where a liability is to be brought into account, the fair value of the liability,
as at the date on which the transferee company becomes party to the loan relationship;
(aa)the amount to be brought into account by the transferee company in respect of the transaction, the result of the series of transactions, or the transfer must be the same as the amount brought into account by the transferor company in respect of the transaction, or, as the case may be, the result of the series of transactions, or the transfer; and”.
(5)In sub-paragraph (6) (novation: equivalent rights) after “rights” insert “, or (as the case may be) its obligations,”.
(6)After sub-paragraph (7) (cases where rights are “equivalent”) insert—
“(7A)For the purposes of sub-paragraph (6) above a person’s obligations under a debtor relationship are equivalent to obligations under another such relationship if they subject the holder of the liability representing the relationship—
(a)to the same obligations to the same persons as to capital, interest and dividends, and
(b)to the same remedies for the enforcement of those obligations,
notwithstanding any difference in the total nominal amounts of the assets representing the corresponding creditor relationships, in the form in which those assets are held or in the manner in which they can be transferred.”.
(7)The amendments made by this paragraph have effect where the date on which the transferee company becomes party to the loan relationship falls on or after 9th April 2003.
Discounted securities where companies have a connection
4(1)In paragraph 17, for sub-paragraph (8) (reference to person standing in the position of creditor to include person indirectly standing in that position) substitute—
“(8)Any reference in this paragraph to a company which stands in the position of a creditor as respects a relevant discounted security includes a reference to a company which indirectly stands in that position by reference to a series of loan relationships or money debts which would be loan relationships if a company directly stood in the position of creditor or debtor.”.
(2)The amendment made by this paragraph has effect in relation to relevant periods beginning on or after 9th April 2003.
(3)If, in the case of an issuing company, 9th April 2003 falls in a relevant period beginning before that day—
(a)the amendment made by this paragraph also has effect in relation to a proportionate part of the debits of that company relating to the amount of the discount that is referable to that period, and
(b)that proportion is the proportion which the part of that period—
(i)beginning with 9th April 2003, and
(ii)ending with the end of that period,
bears to the whole of that period.
(4)Expressions used in sub-paragraph (2) or (3) and in paragraph 17 of Schedule 9 to the Finance Act 1996 (c. 8) have the same meaning in that sub-paragraph as in that paragraph.
Discounted securities of close companies
5(1)Paragraph 18 is amended as follows.
(2)In sub-paragraph (2C) (reference to person standing in the position of creditor to include person indirectly standing in that position) for the words from “includes a reference” to the end of that sub-paragraph substitute “includes a reference to a person who indirectly stands in that position by reference to a series of loan relationships or money debts which would be loan relationships if a company directly stood in the position of creditor or debtor”.
(3)After sub-paragraph (3B) (meaning of “control”) insert—
“(3C)A person who is a participator in a company which controls another company shall be treated for the purposes of this paragraph as also being a participator in that other company.”.
(4)The amendments made by this paragraph have effect in relation to relevant periods beginning on or after 9th April 2003.
(5)If, in the case of an issuing company, 9th April 2003 falls in a relevant period beginning before that day—
(a)the amendments made by this paragraph also have effect in relation to a proportionate part of the debits of that company relating to the amount of the discount that is referable to that period, and
(b)that proportion is the proportion which the part of that period—
(i)beginning with 9th April 2003, and
(ii)ending with the end of that period,
bears to the whole of that period.
(6)Expressions used in sub-paragraph (4) or (5) and in paragraph 18 of Schedule 9 to the Finance Act 1996 (c. 8) have the same meaning in that sub-paragraph as in that paragraph.
Part 2Transitional provisions
Transitional provisions
6(1)In Schedule 25 to the Finance Act 2002 (c. 23) (loan relationships) in Part 3 (transitional provisions) after paragraph 61 insert—
“Non-trading deficit carried forward from last old accounting period
61AAny amount carried forward to a new accounting period under subsection (3) of section 83 of the Finance Act 1996 (carry forward of so much of the non-trading deficit on a company’s loan relationships as is not the subject of a claim under subsection (2) of that section)—
(a)shall be disregarded for the purposes of any claim under subsection (2) of that section; and
(b)shall not be surrendered as group relief by virtue of section 403 of the Taxes Act 1988.”.
(2)The Finance Act 2002 (c. 23) shall be taken to have been originally enacted with the amendment made by this paragraph.