Corporation Tax Act 2009

Chapter 9 Partnerships involving companies

380 Partnerships involving companies

(1) This section applies if—

(a) a trade or business is carried on by a firm,

(b) any of the partners in the firm is a company (a “company partner”), and

(c) a money debt is owed by or to the firm.

(2) In calculating the profits and losses of the trade or business for corporation tax purposes under section 1259 (calculation of firm’s profits or losses), no credits or debits may be brought into account under this Part—

(a) in relation to the money debt, or

(b) in relation to any loan relationship that would fall to be treated for the purposes of the calculation as arising from the money debt.

(3) Instead, each company partner must bring credits and debits into account under this Part in relation to the debt or relationship for each of its accounting periods in which the conditions in subsection (1) are met.

(4) The following provisions of this Chapter contain special rules about the credits and debits to be brought into account under subsection (3)—

(a) section 381 (determinations of credits and debits by company partners: general),

(b) section 382 (company partners using fair value accounting),

(c) section 383 (lending between partners and the partnership),

(d) section 384 (treatment of exchange gains and losses), and

(e) section 385 (company partners' shares where firm owns deeply discounted securities).

(5) In those provisions “company partner” has the same meaning as in this section.

381 Determinations of credits and debits by company partners: general

(1) The credits and debits to be brought into account under section 380(3) are to be determined separately for each company partner as follows.

(2) The money debt owed by or to the firm is treated as if—

(a) it were owed by or, as the case may be, to the company partner, and

(b) it were so owed for the purposes of the trade or business which the company partner carries on.

(3) If the money debt arises from a transaction for the lending of money—

(a) it continues to be treated as so arising, and

(b) accordingly the company partner is treated as having a loan relationship.

(4) Anything done by or in relation to the firm in connection with the money debt is treated as done by or in relation to the company partner.

(5) The credits and debits in the case of each company partner are the partner’s appropriate share of the total credits and debits determined in accordance with subsections (2) to (4) (without any reduction for the fact that the debt is treated as owed by or to each company partner).

(6) A company partner’s “appropriate share” is the share that would be apportioned to it on the assumption in subsection (7).

(7) The assumption is that the total credits and debits determined in accordance with subsections (2) to (4) are apportioned between the partners in the shares in which any profit or loss would be apportioned between them in accordance with the firm’s profit-sharing arrangements.

382 Company partners using fair value accounting

(1) This section applies if a company partner uses fair value accounting in relation to its interest in the firm.

(2) The credits and debits to be brought into account by the company partner under section 380(3) are to be determined on the basis of fair value accounting.

383 Lending between partners and the partnership

(1) This section applies if—

(a) the money debt owed by or to the firm arises from a transaction for the lending of money, and

(b) there is a time in an accounting period of a company partner (“the relevant accounting period”) when conditions A, B and C are met.

(2) Condition A is that—

(a) if the debt is owed by the firm, the company partner stands in the position of a creditor and accordingly has a creditor relationship, and

(b) if the debt is owed to the firm, the company partner stands in the position of a debtor and accordingly has a debtor relationship.

(3) Condition B is that the company partner controls the firm either alone or taken together with one or more other company partners connected with the company partner (see subsection (7)).

(4) Condition C is that the company partner or any other company partner is treated under section 381(3) as if—

(a) it had the debtor relationship which corresponds to the creditor relationship mentioned in subsection (2)(a), or

(b) it had the creditor relationship which corresponds to the debtor relationship mentioned in subsection (2)(b).

(5) If this section applies, for the purposes of this Part for the relevant accounting period there is taken to be a connection between—

(a) the company partner, and

(b) each company partner that is within subsection (4) (including the company partner itself if it is within that subsection),

as a result of one of them having control of the other at a time in the period for the purposes of section 466(2).

(6) The provisions of this Part about connected companies relationships apply accordingly.

(7) For the purposes of subsection (3), one company partner is connected with another at any time in an accounting period if at that or any other time in the accounting period—

(a) one controls the other, or

(b) both are under the control of the same person.

(8) Section 472 (meaning of “control”) applies for the purposes of this section.

384 Treatment of exchange gains and losses

(1) Whether credits and debits in respect of exchange gains and losses are to be brought into account by a company partner under this Chapter as a result of section 328(1), or that section is disapplied by section 328(3), depends on the firm’s accounts.

(2) Section 328(3) applies only so far as exchange gains and losses are recognised in the firm’s statement of total recognised gains and losses, statement of recognised income and expense, statement of changes in equity or statement of income and retained earnings.

(3) Accordingly, a company partner must bring credits and debits into account under this Chapter in respect of exchange gains and losses which are not so recognised.

(4) For the meaning of references in this section to exchange gains and losses, see section 475.

385 Company partners' shares where firm owns deeply discounted securities

(1) This section applies if the firm holds a deeply discounted security.

(2) Each partner is treated for the purposes of this Chapter as beneficially entitled to the share of the security specified in subsection (3).

(3) That share is the share to which the partner would be entitled if—

(a) all the partners were companies, and

(b) the security were apportioned in the shares in which any profit or loss would be apportioned between them in accordance with the firm’s profit-sharing arrangements.

(4) In this section “deeply discounted security” has the same meaning as in Chapter 8 of Part 4 of ITTOIA 2005 (profits from deeply discounted securities) (see section 430 of that Act).