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Corporation Tax Act 2010

Section 463: Taxation of debtor on release of loan to trustees of settlement which has ended

1420.This section deems income to arise to a company for corporation tax purposes in certain circumstances when a loan or advance from a close company is released or written off. It is based on section 421 of ICTA.

1421.This section deals with the following case, as specified in subsections (2) to (5).

  • A close company (X) makes a loan or advance to the trustees of a settlement.

  • Another company (Y) becomes the debtor in respect of this loan or advance.

  • After the settlement has ended, X releases or writes off the whole or part of the loan or advance.

1422.Subsection (6) is the main operative provision.

1423.Subsection (7) quantifies the income. Section 421(1)(a) of ICTAuses the word “gross” in a manner analogous to “grossing up” as defined in section 1128(3) of this Act. Subsection (7) therefore uses a formula to rewrite section 421(1)(a) and (b) of ICTA on the lines of the formula in section 1128(3).

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