Finance Act 1996

5 (1) This paragraph applies in the case of any continuing loan relationship of a company as respects which any amounts would have been brought into account for the purposes of corporation tax in computing the profits or losses of the company from any trade carried on by it if— U.K.

(a) the company had ceased to be a party to the relationship on 31st March 1996; and

(b) where it is not otherwise the case, an accounting period of the company had ended on that date.

(2) Where there is a difference between—

(a) the notional closing value of the relationship as at 31st March 1996, and

(b) the adjusted closing value of that relationship as at that date,

that difference shall be brought into account as provided for in paragraph 6 below.

(3) Except where sub-paragraph (4) or (6) below applies, the notional closing value as at 31st March 1996 of a loan relationship of a company shall be taken for the purposes of this paragraph to be the amount which, for the purposes of computing the profits or losses of the company from any trade carried on by it—

(a) was as at that date, or

(b) had an accounting period of the company ended on that date, would have been,

the amount falling to be brought into account as representing the value of the company’s rights or liabilities under the relationship.

(4) Except where sub-paragraph (6) below applies, if no amount is given by sub-paragraph (3) above, the notional closing value as at 31st March 1996 of a loan relationship of a company shall be taken for the purposes of this paragraph to be the amount which, for the purposes of computing the profits or losses of the company from any trade carried on by it, would have been deductible as representing the cost of becoming a party to the relationship if the company had ceased to be a party to the relationship on 31st March 1996.

[F1 (4A) In sub-paragraph (4) above the reference, in relation to a creditor relationship, to the amount deductible as representing the cost of a company’s becoming a party to the relationship shall not, except where sub-paragraph (4B) or (4C) below applies, include a reference to so much of that amount as would represent the cost of acquiring any right to accrued interest under the loan relationship.

(4B) This sub-paragraph applies where—

(a) the company became a party to the relationship before the beginning of its first relevant accounting period,

(b) interest accruing under the relationship before the company became a party to it was paid to the company after it became a party to it but before the beginning of the company’s first relevant accounting period, and

(c) the interest under the relationship which, in the case of that company, has been brought into account for the purposes of corporation tax has included interest accruing under the relationship before the company became a party to it but paid afterwards.

(4C) This sub-paragraph applies where—

(a) the company became a party to the loan relationship in a transitional accounting period, and

(b) in the case of that company, interest under the relationship which—

(i) accrued before the company became a party to the relationship, but

(ii) became due and payable afterwards,

is brought into account for the purposes of this Chapter in accordance with an authorised mark to market basis of accounting.]

(5) Except where sub-paragraph (6) below applies, the adjusted closing value of that relationship as at that date shall be taken for the purposes of this paragraph to be the amount which for the purposes of [F2 this Chapter (as it had effect immediately before 1st April 2009) was] the opening value as at 1st April 1996 of the company’s rights and liabilities under the relationship.

(6) For the purposes of this paragraph where the asset representing a loan relationship of a company is a relevant qualifying asset of the company, or the liabilities of the company under the relationship are relevant liabilities—

(a) the notional closing value of the relationship as at 31st March 1996 shall be taken for the purposes of this paragraph to be the value given by paragraph 12 below as the notional closing value as at 31st March 1996 of that asset or, as the case may be, of those liabilities; and

(b) the adjusted closing value of the relationship as at 31st March 1996 shall be taken for those purposes to be the amount [F3 which was] as at 1st April 1996 the opening value of the asset or liabilities for the purposes of this Chapter [F4 (as it had effect immediately before 1st April 2009)].

(7) For the purposes of this paragraph, where an accruals basis of accounting is used as respects a loan relationship for the first relevant accounting period of the company, the opening value as at 1st April 1996 of the company’s rights and liabilities under the relationship shall be [F5 taken to have been] the value which (disregarding interest) [F6 was treated] in accordance with paragraph 4 above [F7 (as it had effect immediately before 1st April 2009)] as having accrued to the company before that date.

(8) In this paragraph—

• “attributed amount” means any attributed gain or loss falling to be calculated in accordance with any regulations made under Schedule 16 to the M1 Finance Act 1993 (transitional provisions for exchange gains and losses) which contain any such provision as is mentioned in paragraph 3(1) of that Schedule;

• “commencement day”, in relation to a company, means its commencement day for the purposes of Chapter II of Part II of the M2 Finance Act 1993;

• “market value” has the same meaning as in the 1992 Act;

• “relevant liability”, in relation to a company, means any liability under a loan relationship the value of which has been determined as at the company’s commencement day for the purpose of calculating any attributed amount;

• “relevant qualifying asset”, in relation to a company, means any qualifying asset for the purposes of Chapter II of Part II of the M3 Finance Act 1993 the value of which has been determined as at the company’s commencement day for the purpose of calculating any attributed amount.

Textual Amendments

F1 Sch. 15 para. 5(4A)-(4C) inserted (19.3.1997 with effect as mentioned in Sch. 13 para. 7 of the amending Act) by 1997 c. 15, s. 83(6), Sch. 13 para. 4

F2 Words in Sch. 15 para. 5(5) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 444(3)(a) (with Sch. 2 paras. 1-10, 54)

F3 Words in Sch. 15 para. 5(6)(b) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 444(3)(b)(i) (with Sch. 2 paras. 1-10, 54)

F4 Words in Sch. 15 para. 5(6)(b) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 444(3)(b)(ii) (with Sch. 2 paras. 1-10, 54)

F5 Words in Sch. 15 para. 5(7) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 444(3)(c)(i) (with Sch. 2 paras. 1-10, 54)

F6 Words in Sch. 15 para. 5(7) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 444(3)(c)(ii) (with Sch. 2 paras. 1-10, 54)

F7 Words in Sch. 15 para. 5(7) inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 444(3)(c)(iii) (with Sch. 2 paras. 1-10, 54)

Modifications etc. (not altering text)

C1 Sch. 15 para. 5(7) applied (with modifications) (24.7.2002) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 3 para. 64(6)

C2 Sch. 15 para. 5(7) applied (with modifications) (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 2 para. 60(5) (with Sch. 2 Pts. 1, 2)

Marginal Citations

M1 1993 c. 34.

M2 1993 c. 34.

M3 1993 c. 34.