Corporation Tax Act 2009

407 Postponement until redemption of debits for connected companies' deeply discounted securities

(1) This section applies as respects any accounting period (“the relevant period”) if—

(a) a debtor relationship of a company (“the issuing company”) is represented by a deeply discounted security issued by it,

(b) at any time in the relevant period another company stands in the position of a creditor as respects the security,

(c) there is a connection between those companies for the relevant period,

(d) the period is not the accounting period in which the security is redeemed, and

(e) credits representing the full amount of the discount which is referable to the relevant period are not brought into account for the purposes of this Part in respect of the corresponding creditor relationship for any accounting period (see section 412(2)).

(2) The debits to be brought into account for the purposes of this Part in respect of the loan relationship by the issuing company are to be adjusted so that any debit relating to the amount of the discount which is referable to the relevant period—

(a) is not brought into account for the relevant period, but

(b) is brought into account for the accounting period in which the security is redeemed.

(3) The amount of the discount which is referable to the relevant period is the amount of it which would be brought into account for that period apart from this section.

(4) For the meaning of “standing in the position of a creditor” and the meaning of “corresponding creditor relationship” where a company indirectly stands in that position, see section 412.

(5) Whether there is a connection between companies for the purposes of this section is determined in accordance with section 408.