44Close companies: loans to participators
(1)In relation to any claim made after the passing of this Act under subsection (5) of section 286 of the Taxes Act (relief where loan to participator is repaid) that subsection shall have effect with the substitution for the words " year of assessment " of the words " financial year ".
(2)After section 287 of that Act there shall be inserted—
“287AExtension of s. 286 to loans by controlled companies.
(1)Subject to subsection (4) below, where a company which is controlled by a close company makes a loan which, apart from this section does not give rise to a charge under subsection (1) of section 286 above, that section shall apply as if the loan had been made by the close company.
(2)Subject to subsection (4) below, where a company which is not controlled by a close company makes a loan which, apart from this section does not give rise to a charge under subsection (1) of section 286 above, and a close company subsequently acquires control of it, that section shall apply as if the loan had been made by the close company immediately after the time when it acquired control.
(3)Where two or more close companies together control the company that makes or has made the loan, subsections (1) and (2) above shall have effect—
(a)as if each of them controlled that company ; and
(b)as if the loan had been made by each of those close companies ;
but the loan shall be apportioned between those close companies in such proportion as may be appropriate having regard to the nature and amount of their respective interests in the company that makes or has made the loan.
(4)Subsections (1) and (2) above do not apply if it is shown that no person has made any arrangements (otherwise than in the ordinary course of a business carried on by him) as a result of which there is a connection—
(a)between the making of the loan and the acquisition of control; or
(b)between the making of the loan and the provision by the close company of funds for the company making the loan ;
and the close company shall be regarded as providing funds as aforesaid if it directly or indirectly makes any payment or transfers any property to, or releases or satisfies (in whole or in part) a liability of, the company making the loan.
(5)Where, by virtue of this section, section 286 above has effect as if a loan made by one company had been made by another any question under that section or section 287 above whether—
(a)the company making the loan did so otherwise than in the ordinary course of a business carried on by it which includes the lending of money ;
(b)the loan or any part of it has been repaid to the company;
(c)the company has released or written off the whole or part of the debt in respect of the loan,
shall be determined by reference to the company that made the loan.
(6)This section shall be construed as one with section 286 above, and in this section " loan" includes advance, and references to a company making a loan include references to cases in which the company is, or if it were a close company would be, regarded as making a loan by virtue of subsection (2) of that section.
(3)In paragraph 19(5) of Schedule 16 to the [1972 c. 41.] Finance Act 1972 (information powers) for the words " sections 286 and 287 of the Taxes Act " there shall be substituted the words " sections 286, 287 and 287A of the Taxes Act”.
(4)Subsection (2) above has effect as respects loans made or debts incurred or assigned after 15th April 1976.