Part 5

Loan Relationships
Chapter 8

Connected parties relationships: late interest

Loans to close companies by participators etc
375
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
and, 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 for 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 for 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.
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.
S. 375 excluded by S.I. 2006/3296, reg. 19(1) (as substituted (with effect in accordance with reg. 1(2)(3) of the amending S.I.) by The Taxation of Securitisation Companies (Amendment) Regulations 2018 (S.I. 2018/143), regs. 1(1), 10(3))
Words in s. 375(3)(b) inserted (with effect in accordance with Sch. 20 para. 9 of the amending Act) by Finance Act 2009 (c. 10), Sch. 20 para. 3(3)
S. 375(4A) inserted (with effect in accordance with Sch. 20 para. 9 of the amending Act) by Finance Act 2009 (c. 10), Sch. 20 para. 3(4)
Pt. 5 modified (with effect in accordance with reg. 1(2)(3) of the amending S.I.) by The Taxation of Regulatory Capital Securities Regulations 2013 (S.I. 2013/3209), regs. 1(1), 11(3)-(6)
Pt. 5 applied (with modifications) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 990(5), 1184(1) (with Sch. 2)
Pt. 5 modified by 2010 c. 4, s. 356NB(1)-(4) (as inserted (1.4.2014) by Finance Act 2014 (c. 26), Sch. 16 paras. 4, 6)
Pt. 5 modified by 2007 c. 3, s. 809FZZ(9) (as inserted (with effect in accordance with s. 37(4) of the amending Act) by Finance Act 2016 (c. 24), s. 37(2))
Pt. 5 modified (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 88(1)(2)(7) (with s. 147, Sch. 17)
Pt. 5 modified by 2010 c. 4, s. 356NC(1)-(4) (as inserted (1.4.2014) by Finance Act 2014 (c. 26), Sch. 16 paras. 4, 6)
Pt. 5 modified (30.9.2013) by The BRB (Residuary) Limited (Tax Consequences) Order 2013 (S.I. 2013/2242), arts. 1, 7
Words in s. 375(1) inserted (with effect in accordance with Sch. 20 para. 9 of the amending Act) by Finance Act 2009 (c. 10), Sch. 20 para. 3(2)
Pt. 5 modified by 2010 c. 4, s. 676AG(1) (as inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 75)
Pt. 5 modified (1.4.2012) by Budget Responsibility and National Audit Act 2011 (c. 4), s. 29, Sch. 4 para. 2; S.I. 2011/2576, art. 5
Pt. 5 Chs. 6-8 modified (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 601, 1184(1) (with Sch. 2)
Pt. 5 applied (with effect in accordance with Sch. 24 paras. 13-16 of the amending Act) by Finance Act 2009 (c. 10), Sch. 24 para. 15(2)(3)
Pt. 5 modified (15.11.2011 for specified purposes, 30.3.2012 for E.W.) by Localism Act 2011 (c. 20), ss., 240(5)(o), Sch. 24 para. 5; S.I. 2012/628, art. 3(b)
Words in s. 375(4)(b) inserted (with effect in accordance with Sch. 20 para. 9 of the amending Act) by Finance Act 2009 (c. 10), Sch. 20 para. 3(3)