Part 10

Corporate interest restriction
CHAPTER 9

Cases involving particular types of company or business

Fair value accounting

Creditor relationships of companies determined on basis of fair value accounting
456
1
A company may elect for all of its creditor relationships which are dealt with on the basis of fair value accounting (“fair-value creditor relationships”) to be subject to the provision made by this section for all of its accounting periods.
2
For the purpose of calculating under this Part—
a
tax-interest expense amounts of the company, and
b
tax-interest income amounts of the company,
the relevant loan relationship debits and relevant loan relationship credits in respect of the company's fair-value creditor relationships are instead to be determined for the accounting periods on an amortised cost basis of accounting.
3
If—
a
a company has a hedging relationship between a relevant contract (“the hedging instrument”) and the asset representing a loan relationship subject to the election, and
b
the loan relationship is dealt with in the company's accounts on the basis of fair value accounting,
it is to be assumed in applying the amortised cost basis of accounting that the hedging instrument has where possible been designated for accounting purposes as a fair value hedge of the loan relationship.
4
An election under this section—
a
must be made before the end of 12 months from the end of the relevant accounting period,
b
has effect for that accounting period and all subsequent accounting periods, and
c
is irrevocable.
5
For this purpose “
relevant accounting period
” means—
a
the first accounting period in which the company has a fair-value creditor relationship, or
b
if that accounting period has ended before 1 April 2017, the first accounting period in relation to which any provision of this Part applies.
6
In this section “
amortised cost basis of accounting
”, in relation to an accounting period, has the same meaning as in Part 5 of CTA 2009 (see section 313), but, in the case of creditor relationships relating to insurance activities, as if that basis of accounting required recognition only of—
a
interest accrued for the period in respect of the creditor relationships, or
b
if the creditor relationships arise as a result of section 490 of CTA 2009 (OEICs, unit trusts and offshore funds), amounts that can reasonably be regarded as equating to interest accrued for the period in respect of those relationships.
7
In subsection (6) “
creditor relationships relating to insurance activities
” means creditor relationships which—
a
are held by an insurance company, a friendly society within the meaning of Part 3 of FA 2012 (see section 172) or a body corporate which carries on underwriting business as a member of Lloyd's, or
b
are held in connection with the regulation of underwriting business carried on by members of Lloyd's.
8
The Commissioners may by regulations amend the definition of “amortised cost basis of accounting” in this section.
9
Other expressions which are used in this section and in Part 5 of CTA 2009 have the same meaning in this section as they have in that Part.
Pt. 10: the existing Pt. 10 renumbered as Pt. 11 (except for ss. 375, 376 which are repealed), the existing ss. 372-374, 377-382 renumbered as ss. 499-507 and a new Pt. 10 (ss. 372-498) inserted (with effect in accordance with Sch. 5 para. 25(1)-(3) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 1, 10(1)(2)(a)(3) (with Sch. 5 paras. 27, 32-34)
Pt. 10 excluded by 2010 c. 4, s. 937NA (as inserted (with effect in accordance with Sch. 5 para. 25(1)(2) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 7)
Pt. 10 excluded by 2010 c. 4, s. 938V(d) (as substituted (with effect in accordance with Sch. 5 para. 25(1)(2) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 9)
Pt. 10 excluded by 2010 c. 4, s. 938N(e) (as substituted (with effect in accordance with Sch. 5 para. 25(1)(2) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 8)