Part 7

Community investment tax relief
Chapter 6

Withdrawal or reduction of CITR

Repayment of loans

Repayment of loan capital during 5 year period
362
1
If the investment consists of a loan and—
a
the average capital balance of the loan for the third, fourth or final year of the 5 year period is less than the permitted balance for the year in question, and
b
the difference between those balances is not an amount of insignificant value,
any CITR attributable to the investment in respect of any tax year must be withdrawn.
2
For the purposes of this section—
- “the average capital balance” of the loan for a period is the mean of the daily balances of capital outstanding during that period, ignoring any non-standard repayments of the loan made in that period or at any earlier time, and
- “the permitted balance” of the loan is—
  1. for the third year of the 5 year period, 75% of the average capital balance for the period of 6 months beginning 18 months after the investment date,
  2. for the fourth year of that period, 50% of that balance, and
  3. for the final year of that period, 25% of that balance.
3
For the purposes of subsection (2) a repayment of the loan is a non-standard repayment if subsection (4) or (5) applies.
4
This subsection applies if the repayment is made at the choice or discretion of the CDFI, and not as a direct or indirect consequence of any obligation provided for under the terms of the loan agreement.
5
This subsection applies if the repayment is made as a result of the failure of the CDFI to meet any obligation of the loan agreement which—
a
is imposed merely because of the commercial risks to which the investor is exposed as lender under that agreement, and
b
is no more likely to be breached than any obligation that might reasonably have been agreed in respect of the loan in the absence of this Part.
6
For the purposes of this section “an amount of insignificant value” means an amount which—
a
is not more than £1,000, or
b
if it is more than £1,000, is insignificant in relation to the average capital balance of the loan for the year of the 5 year period in question.