Corporation Tax Act 2010

761 Deemed loan relationship if borrower is a company

(1) This section applies if—

(a) there is a type 1 finance arrangement,

(b) the borrower is a company, and

(c) either—

(i) the arrangement is prevented by section 759 from having the relevant effect in relation to the company, or

(ii) section 760 applies to the company.

(2) For the purposes of Part 5 of CTA 2009 (loan relationships)—

(a) the advance is treated in relation to the company as a money debt owed by it, and

(b) the arrangement is treated in relation to the company as a loan relationship of the company (as a debtor relationship).

(3) Any amount which in accordance with generally accepted accounting practice is recorded in the company’s accounts as a finance charge in respect of the advance is treated as interest payable under the loan relationship.

(4) If an amount is treated as interest (“deemed interest”) under subsection (3), to find out when it is paid—

(a) treat the payments mentioned in section 758(2)(c) as consisting of amounts for repaying the advance and amounts (“the interest elements”) in respect of interest on the advance,

(b) treat the interest elements of the payments as paid when the payments are paid, and

(c) treat the deemed interest as paid at the times when the interest elements are treated as paid.