Finance Act 1996

[F1 Impairment losses] where parties have a connection U.K.

Textual Amendments

F1 Words in Sch. 9 para. 6 heading substituted (with effect in accordance with s. 52(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 10 para. 22(2)

6 (1) This paragraph applies where for any accounting period section 87 of this Act [F2 (accounting method where parties have a connection) applies] as respects a creditor relationship of a company. U.K.

(2) The credits and debits which for that period are to be brought into account for the purposes of this Chapter F3 ... shall be computed subject to [F4 sub-paragraph (3) (and the provisions mentioned there) and sub-paragraph (6)] below.

[F5 (3) An impairment loss may be brought into account for the purposes of this Chapter only in accordance with—

[F6 (a) sub-paragraph (4) below, or

(b) paragraph 6A.]

[F7 (3A) Where an impairment loss is excluded by sub-paragraph (3), no credit in respect of any reversal of the impairment shall be brought into account for the purposes of this Chapter.]

(4) [F8 An impairment loss is not excluded by sub-paragraph (3)] in relation to a liability to pay any amount to the company (“the creditor company”) under the creditor relationship where—

(a) in consideration of, or of any entitlement to, any shares forming part of the ordinary share capital of the company on whom the liability would otherwise have fallen, the creditor company treats the liability as discharged; and

(b) the condition specified in sub-paragraph (5) below is satisfied.

(5) That condition is that there would be no connection between the two companies for the accounting period in which that consideration is given if the question whether there is such a connection for that period fell to be determined, in accordance with section 87 of this Act, by reference only to times before the creditor company acquired possession of, or any entitlement to, the shares in question.

[F9 (6) Where in any period a related transaction takes place in relation to the loan relationship—

(a) the debits brought into account for that period in respect of the relationship must not be more than they would have been if the transaction had not taken place, and

(b) the credits brought into account for that period in respect of the relationship must not be less than they would have been if the transaction had not taken place.

(7) In determining for the purposes of sub-paragraph (6) the debits and credits that would have been brought into account if the related transaction had not taken place, no account shall be taken of any amounts that would have accrued at times after the transaction took place.]

[F10 (8) Nothing in this paragraph affects the debits or credits to be brought into account for the purposes of this Chapter in respect of exchange gains or losses arising from a debt.]]

Textual Amendments

F2 Words in Sch. 9 para. 6(1) substituted (with effect in accordance with s. 52(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 10 para. 22(3)

F3 Words in Sch. 9 para. 6(2) repealed (with effect in accordance with s. 52(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 10 para. 22(4), Sch. 42 Pt. 2(6)

F4 Words in Sch. 9 para. 6(2) substituted (with effect in accordance with Sch. 4 para. 13(5) of the amending Act) by Finance Act 2005 (c. 7), Sch. 4 para. 13(2)

F5 Sch. 9 para. 6(3) substituted (with effect in accordance with s. 52(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 10 para. 22(5)

F6 Sch. 9 para. 6(3)(a)(b) substituted for Sch. 9 para. 6(3)(a)-(c) (with effect in accordance with Sch. 4 para. 13(5) of the amending Act) by Finance Act 2005 (c. 7), Sch. 4 para. 13(3)

F7 Sch. 9 para. 6(3A) inserted (with effect in accordance with s. 52(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 10 para. 22(6)

F8 Words in Sch. 9 para. 6(4) substituted (with effect in accordance with s. 52(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 10 para. 22(7)

F9 Sch. 9 para. 6(6)(7) substituted (with effect in accordance with Sch. 4 para. 13(5) of the amending Act) by Finance Act 2005 (c. 7), Sch. 4 para. 13(4)

F10 Sch. 9 para. 6(8) added (24.7.2002 with effect as mentioned in s. 79(3) of the amending Act) by Finance Act 2002 (c. 23), s. 79(2), Sch. 23 Pt. 1 para. 9(3) (with Sch. 23 Pt. 3 para. 25)