Finance Act 2009

Stranded deficits in non-trading loan relationships: financing expense

63 (1) This paragraph applies where, apart from this paragraph, an amount (“the relevant amount”) is a financing expense amount of a company (“company A”) by virtue of meeting condition A in paragraph 54.

(2) The relevant amount is to be treated as not being a financing expense amount of company A, but only if an election is made for this purpose.

(3) Such an election may not be made unless the following conditions are met.

(4) The first condition is that company A and the other party to the loan relationship (“company B”) are both members of the worldwide group.

(5) The second condition is that company B—

(a) is resident in the United Kingdom, or

(b) is not resident in the United Kingdom and is carrying on a trade in the United Kingdom through a permanent establishment in the United Kingdom.

(6) The third condition is that, under section 457 of CTA 2009, company B carries forward an amount of non-trading deficit and sets it off against non-trading profits of an accounting period that falls wholly or partly within the period of account of the worldwide group.

(7) The fourth condition is that the amount of non-trading deficit carried forward and set off is equal to, or greater than, the relevant amount.

(8) An election under this paragraph may only be made—

(a) jointly by company A and company B, and

(b) within 36 months of the end of the period of account of the worldwide group to which the relevant amount relates.