Part 5

Loan Relationships
Chapter 12

Special rules for particular kinds of securities

Deeply discounted securities: connected companies and close companies

Postponement until redemption of debits for close companies' deeply discounted securities
409
1
This section applies for any accounting period (“the relevant period”) if—
a
a debtor relationship of a close company (“the issuing company”) is represented by a deeply discounted security it has issued,
b
at any time in the period there is a person ("C") who stands in the position of a creditor as respects the security and is—
i
a participator in the issuing company,
ii
an associate of such a participator,
iii
a company of which such a participator has control,
iv
a person who controls a company which is such a participator,
v
an associate of a person within sub-paragraph (iv), or
vi
a company controlled by a person within sub-paragraph (iv),
c
the period is not the accounting period in which the security is redeemed, and
d
this section is not disapplied by section 410
and, where it applies, the non-qualifying territory condition is met.
2
The debits which are to be brought into account for the purposes of this Part by the issuing company in respect of the loan relationship are to be adjusted so that debits relating to the amount of the discount that is referable to the relevant period (“relevant debits”)—
a
are not brought into account for the relevant period, but
b
are brought into account for the accounting period in which the security is redeemed.
3
If there is a person within subsection (1)(b) for only part of the relevant period, subsection (2) applies only to the appropriate proportion of the relevant debits.
4
In subsection (3) “the appropriate proportion” means the proportion that the part of the relevant period for which there is such a person bears to the whole of that period.
5
The amount of the discount that is referable to the relevant period is the amount of it which would be brought into account for the purposes of this Part for the relevant period in the case of the issuing company, apart from subsections (2) and (3).
6
For the meaning of other expressions used in this section, see—
a
section 411 (interpretation of this section), and
b
section 412 (persons indirectly standing in the position of creditor).
S. 409(2) disapplied (24.2.2022) by Finance Act 2022 (c. 3), Sch. 2 para. 51(1)
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
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
Ss. 406-412 excluded by S.I. 2006/3296, reg. 19(3) (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))
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)
Word in s. 409(1)(b) inserted (with effect in accordance with Sch. 20 para. 9 of the amending Act) by Finance Act 2009 (c. 10), Sch. 20 para. 7(a)
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. 409(1) inserted (with effect in accordance with Sch. 20 para. 9 of the amending Act) by Finance Act 2009 (c. 10), Sch. 20 para. 7(b)