Income and Corporation Taxes Act 1988

[F1 807A Disposals and acquisitions of company loan relationships with or without interest. U.K.

(1) This Part shall have effect for the purposes of corporation tax in relation to any company as if tax falling within subsection (2) below were to be disregarded.

(2) [F2 Subject to subsection (2A) below,] tax falls within this subsection in relation to a company to the extent that it is—

(a) tax under the law of a territory outside the United Kingdom; and

(b) is attributable, on a just and reasonable apportionment,

[F3 (i)] to interest accruing under a loan relationship at a time when the company is not a party to the relationship [F4 ; or

(ii) to so much of a [F5 relevant payment] as, on such an apportionment, is attributable to a time when the company is not a party to [F6 the derivative contract concerned]].

[F7 (2A) Tax attributable to interest accruing to a company under a loan relationship does not fall within subsection (2) above if—

(a) at the time when the interest accrues, that company has ceased to be a party to that relationship by reason of having made the initial transfer under or in accordance with any repo or stock-lending arrangements relating to that relationship; and

(b) that time falls during the period for which those arrangements have effect.]

[F8 (2B) Where, in the case of any share, section 91A or 91B of the Finance Act 1996 (shares treated as loan relationships) applies in relation to a company for an accounting period, this section has effect—

(a) in relation to a distribution in respect of the share as it has effect in relation to interest under a loan relationship, and

(b) in relation to a distribution accruing in respect of the share at a time when the company does not (within the meaning of the section in question) hold the share as it applies in relation to interest accruing under a loan relationship at a time when the company is not a party to the loan relationship.]

(3) Subject to subsections (1), (4) and (5) of this section, where—

(a) any non-trading credit relating to an amount of interest under a loan relationship is brought into account for the purposes of Chapter II of Part IV of the Finance Act 1996 (loan relationships) in the case of any company,

(b) that amount falls, as a result of any related transaction [F9 other than the initial transfer under or in accordance with any repo or stock-lending arrangements relating to that relationship], to be paid to a person other than the company, and

(c) had the company been entitled, at the time of that transaction, to receive a payment of an amount of interest equal to the amount of interest to which the non-trading credit relates, the company would have been liable in respect of the amount of interest received to an amount of tax under the law of a territory outside the United Kingdom,

credit for that amount of tax shall be allowable under section 790(4) as if that amount of tax were an amount of tax paid under the law of that territory in respect of the amount of interest to which the non-trading credit relates.

(4) F10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) The Treasury may by regulations provide for subsection (3) above to apply—

(a) in the case of trading credits, as well as in the case of non-trading credits;

(b) F10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) Regulations under subsection (5) above may—

(a) provide for subsection (3) above to apply in the case of a trading credit F11 . . . only if the circumstances are such as may be described in the regulations;

(b) provide for subsection (3) above to apply, in cases where it applies by virtue of any such regulations, subject to such exceptions, adaptations or other modifications as may be specified in the regulations;

(c) make different provision for different cases; and

(d) contain such incidental, supplemental, consequential and transitional provision as the Treasury think fit.

[F12 [F13 (6A) In this section “repo or stock-lending arrangements” means—

(a) a debtor repo within the meaning of paragraph 2 of Schedule 13 to the Finance Act 2007, or

(b) a stock lending arrangement within the meaning of section 263B of the 1992 Act.

(6B) In any case where a debtor repo within the meaning of that paragraph constitutes the repo or stock-lending arrangements—

(a) a reference in this section, in relation to those arrangements, to the initial transfer is to the sale mentioned in condition C of that paragraph; and

(b) a reference in this section, in relation to those arrangements, to the period for which they have effect is to the period from the making of the initial transfer until the earlier of the time when the subsequent purchase mentioned in condition D of that paragraph takes place and the time when it becomes apparent that that subsequent purchase will not take place.

(6C) In any case where a stock lending arrangement within the meaning of section 263B of the 1992 Act constitutes the repo or stock-lending arrangements—

(a) a reference in this section, in relation to those arrangements, to the initial transfer is to the transfer mentioned in subsection (1)(a) of that section; and

(b) a reference in this section, in relation to those arrangements, to the period for which they have effect is to the period from the making of the initial transfer until the earlier of the time when the transfer mentioned in subsection (1)(b) of that section takes place and the time when it becomes apparent that that transfer will not take place.]]

(7) In this section—

• “related transaction” has the same meaning as in section 84 of the Finance Act 1996;

• [F14 “relevant payment” means a payment the amount of which falls to be determined (wholly or mainly) by applying to a notional principal amount specified in a derivative contract, for a period so specified, a rate the value of which at all times is the same as that of a rate of interest so specified;]

• [F15 F16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ] and

• “trading credit” means any credit falling to be brought into account for the purposes of Chapter II of Part IV of the Finance Act 1996 (loan relationships) in accordance with section 82(2) of that Act.]

Textual Amendments

F1 S. 807A inserted (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), Sch. 14 para. 46 (with Sch. 15)

F2 Words in s. 807A(2) inserted (with effect in accordance with s. 91(6) of the amending Act) by Finance Act 1997 (c. 16), s. 91(2)

F3 Words in s. 807A(2)(b) renumbered as s. 807A(2)(b)(i) (with effect in accordance with Sch. 30 para. 24(4) of the amending Act) by virtue of Finance Act 2000 (c. 17), Sch. 30 para. 24(2)

F4 S. 807A(2)(b)(ii) and preceding word inserted (with effect in accordance with Sch. 30 para. 24(4) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 24(2)

F5 Words in s. 807A(2)(b)(ii) substituted (with effect in accordance with s. 83(3) of the amending Act) by Finance Act 2002 (c. 23), Sch. 27 para. 12(2)(a) (with Sch. 28)

F6 Words in s. 807A(2)(b)(ii) substituted (with effect in accordance with s. 83(3) of the amending Act) by Finance Act 2002 (c. 23), Sch. 27 para. 12(2)(b) (with Sch. 28)

F7 S. 807A(2A) inserted (with effect in accordance with s. 91(6) of the amending Act) by Finance Act 1997 (c. 16), s. 91(3)

F8 S. 807A(2B) inserted (with effect in accordance with Sch. 7 para. 5(3) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 7 para. 5(2)

F9 Words in s. 807A(3)(b) inserted (with effect in accordance with s. 91(7) of the amending Act) by Finance Act 1997 (c. 16), s. 91(4)

F10 S. 807A(4)(5)(b) repealed (19.7.2007) by Finance Act 2007 (c. 11), Sch. 10 para. 16(3)(g), Sch. 27 Pt. 2(10), Note

F11 Words in s. 807A(6)(a) repealed (19.7.2007) by Finance Act 2007 (c. 11), Sch. 10 para. 16(3)(g), Sch. 27 Pt. 2(10), Note

F12 S. 807A(6A) inserted (19.3.1997) by Finance Act 1997 (c. 16), s. 91(5)

F13 S. 807A(6A)-(6C) substituted for s. 807A(6A) (with effect in accordance with S.I. 2007/2483, art. 4) by Finance Act 2007 (c. 11), Sch. 14 para. 10

F14 S. 807A(7): definition of "relevant payment" inserted (with effect in accordance with s. 83(3) of the amending Act) by Finance Act 2002 (c. 23), Sch. 27 para. 12(3) (with Sch. 28)

F15 S. 807A(7): definition of "relevant qualifying payment" inserted (with effect in accordance with Sch. 30 para. 24(4) of the amending Act) by Finance Act 2000 (c. 17), Sch. 30 para. 24(3)

F16 S. 807A(7): definition of "relevant qualifying payment" repealed (with effect in accordance with s. 83(3) of the repealing Act) by Finance Act 2002 (c. 23), Sch. 27 para. 12(4), Sch. 40 Pt. 3(13), Note (with Sch. 28)