Part 5Loan Relationships
Chapter 8Connected parties relationships: late interest
375Loans to close companies by participators etc
(1)
The case to which this section applies is where—
(a)
there is a time in the actual accrual period when the close company conditions are met, and
(b)
neither the CIS-based close company conditions nor the CIS limited partnership conditions are met
F1and, where subsection (4A) applies, the non-qualifying territory condition is met.
(2)
The close company conditions are that—
(a)
the company which has the debtor relationship (“D”) is a close company, and
(b)
a person (“C”) standing in the position of creditor as respects the loan relationship is—
(i)
a participator in D,
(ii)
the associate of a person who is participator in D,
(iii)
a company of which a participator in D has control,
(iv)
a company in which a participator in D has a major interest,
(v)
a person who controls a company which is a participator in D,
(vi)
the associate of a person within sub-paragraph (v), or
(vii)
a company controlled by a person within sub-paragraph (v).
(3)
The CIS-based close company conditions are that—
(a)
D is a CIS-based close company at all times when the close company conditions are met,
(b)
C is not resident F2for tax purposes in a non-qualifying territory at any such time, and
(c)
D is a small or medium-sized enterprise for the actual accrual period.
(4)
The CIS limited partnership conditions are that—
(a)
the debt is one which is owed to, or to persons acting for, a CIS limited partnership,
(b)
no member of that partnership is resident F3for tax purposes in a non-qualifying territory at any time in the actual accrual period,
(c)
D has received written notice from the partnership containing information from which it appears that the condition in paragraph (b) is met, and
(d)
D is a small or medium-sized enterprise for the actual accrual period.
F4(4A)
This subsection applies if C is a company; and the non-qualifying territory condition is that C is—
(a)
resident for tax purposes in a non-qualifying territory at any time in the actual accrual period, or
(b)
effectively managed in a non-taxing non-qualifying territory at any such time.
(5)
Section 376 applies for the interpretation of this section.