Finance Act 2009

Stranded management expenses in non-trading loan relationships: financing expense E+W+S+N.I.

65 (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. E+W+S+N.I.

(2) The relevant amount is 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 finance arrangement (“company B”) are both members of the worldwide group.

(5) The second condition is that company B is a company with investment business (within the meaning of Part 16 of CTA 2009) and—

(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 company B is allowed a deduction under section 1219 of CTA 2009 (expenses of management of a company's investment business) in respect of an accounting period that falls wholly or partly within the period of account of the worldwide group (“the relevant period”).

(7) The fourth condition is that the amount of the deduction allowed is equal to, or greater than, the relevant amount.

(8) The fifth condition is that the calculation of company B's total profits for the relevant period for the purposes of corporation tax results in a loss if company B's credit is not included in that calculation.

(9) 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.

(10) In this paragraph “company B's credit” means the credit to company B that arises from the debit to company A by virtue of which condition A in paragraph 54 is met.