Section 696: Restriction on debits to be brought into account
2160.This section restricts debits on the company’s loan relationships in cases in which this Chapter applies. It is based on section 768C of, and paragraph 10 of Schedule 28A to, ICTA.
2161.This section is the first of a group of six sections (sections 696 to 701) imposing restrictions on corporation tax relief. The first four of these sections restrict reliefs given by CTA 2009, and are arranged in the order in which those reliefs appear in that Act. The fifth and sixth of these sections restrict relief for property losses, and are arranged in the order in which those reliefs appear in Chapter 4 of Part 4 of this Act.
2162.Subsection (1) states the purpose of the section.
2163.Section 574 of CTA 2009 provides that non-trading credits and debits from derivative contracts are to be brought into account as if they were non-trading credits or non-trading debits for the purposes of Part 5 of CTA 2009 in respect of loan relationships of the company. The reference to that section in section 768C(9) of ICTA is therefore otiose. Subsection (1) therefore omits it.
2164.Subsection (2) limits the scope of the section to cases in which gains arise or accrue as discussed in the ‘overview’ paragraphs of thecommentary on this Chapter. Its inclusion here emphasises the point that the section only makes a difference in practice if there are both debits to be restricted and a gain to be sheltered by those debits.
2165.Subsections (3) to (5) set out the consequences of the apportionment made in accordance with section 702.
2166.The other five sections in this group have a similar structure.
