Finance Act 1996

Transactions not at arm’s length U.K.

11 [F1 (1) Where— U.K.

(a) debits or credits in respect of a loan relationship of a company fall to be brought into account for the purposes of this Chapter in respect of a related transaction, and

(b) that transaction is not a transaction at arm’s length,

the debits or credits to be brought into account shall be determined on the assumption that the transaction was entered into on the terms on which it would have been entered into between independent persons.

This is subject to the exceptions in sub-paragraphs (1A), (2), (3) and (3A).]

[F2 (1A) Notwithstanding section 80(5) of this Act, sub-paragraph (1) above shall not apply to debits or credits in respect of amounts which—

(a) fall to be adjusted for tax purposes under Schedule 28AA to the Taxes Act 1988 (provision not at arm’s length), or

(b) fall within that Schedule without falling to be so adjusted.

(1B) For the purposes of sub-paragraph (1A) above, an amount falls within Schedule 28AA to the Taxes Act 1988 without falling to be adjusted under that Schedule in a case where—

(a) the conditions in paragraph 1(1) of that Schedule are met, and

(b) the actual provision does not differ from the arm’s length provision.]

(2) Sub-paragraph (1) above shall not apply to debits arising from the acquisition of rights under a loan relationship where those rights are acquired for less than market value.

[F3 (3) Sub-paragraph (1) above does not apply if the related transaction—

(a) is a transaction as a result of which paragraph 12 below (groups)—

(i) applies by virtue of sub-paragraph (1)(a) of it, or

(ii) would so apply, apart from sub-paragraph (2A) of it (transferor using fair value accounting), or

(b) is part of a series of transactions as a result of which that paragraph—

(i) applies by virtue of sub-paragraph (1)(b) of it, or

(ii) would so apply, apart from sub-paragraph (2A) of it.]

[F4 (3A) Sub-paragraph (1) above shall not apply to any exchange gains or losses.]

F5 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F6 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F1 Sch. 9 para. 11(1) substituted (with effect in accordance with s. 52(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 10 para. 30

F2 Sch. 9 para. 11(1A), (1B) inserted (with effect in accordance with s. 37 of the amending Act) by Finance Act 2004 (c. 12), Sch. 5 para. 6(3)

F3 Sch. 9 para. 11(3) substituted (with effect in accordance with Sch. 7 para. 16(4) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 7 para. 16(2)

F4 Sch. 9 para. 11(3A) inserted (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. 10(3) (with Sch. 23 Pt. 3 para. 25)

F5 Sch. 9 para. 11(4) repealed (24.7.2002 with effect in accordance with s. 79(3) of and Sch. 23 to the repealing Act) by Finance Act 2002 (c. 23), s. 141, Sch. 40 Pt. 3(10)

F6 Sch. 9 para. 11(5) repealed (with effect in accordance with Sch. 7 para. 16(4) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 7 para. 16(3), Sch. 11 Pt. 2(8)

Modifications etc. (not altering text)

C1 Sch. 9 para. 11 excluded (15.1.2001) by 2000 c. 38, s. 250, Sch. 26 para. 35(1); S.I. 2000/3376, art. 2

C2 Sch. 9 para. 11 restricted (E.W.S.) (24.7.2005) by Railways Act 2005 (c. 14), s. 60(2), Sch. 10 para. 28; S.I. 2005/1909, art. 2