Finance Act 1996

81 Meaning of “loan relationship” etc. U.K.

(1) Subject to the following provisions of this section, a company has a loan relationship for the purposes of the Corporation Tax Acts wherever—

(a) the company stands (whether by reference to a security or otherwise) in the position of a creditor or debtor as respects any money debt; and

(b) that debt is one arising from a transaction for the lending of money;

and references to a loan relationship and to a company’s being a party to a loan relationship shall be construed accordingly.

(2) For the purposes of this Chapter a money debt is a debt [F1 which is, or has at any time been, one that falls, or that may at the option of the debtor or of the creditor fall,] to be settled—

(a) by the payment of money; F2 ...

(b) by the transfer of a right to settlement under a debt which is itself a money debt[F3 , or

(c) by the issue or transfer of any shares in any company,]

[F4 disregarding any other option exercisable by either party.]

(3) Subject to subsection (4) below, where an instrument is issued by any person for the purpose of representing security for, or the rights of a creditor in respect of, any money debt, then (whatever the circumstances of the issue of the instrument) that debt shall be taken for the purposes of this Chapter to be a debt arising from a transaction for the lending of money.

(4) For the purposes of this Chapter a debt shall not be taken to arise from a transaction for the lending of money to the extent that it is a debt arising from rights conferred by shares in a company.

(5) For the purposes of this Chapter—

(a) references to payments or interest under a loan relationship are references to payments or interest made or payable in pursuance of any of the rights or liabilities under that relationship; and

(b) references to rights or liabilities under a loan relationship are references to any of the rights or liabilities under the agreement or arrangements by virtue of which that relationship subsists;

and those rights or liabilities shall be taken to include the rights or liabilities attached to any security which, being a security issued in relation to the money debt in question, is a security representing that relationship.

(6) In this Chapter “money” includes money expressed in a currency other than sterling.

Textual Amendments

F1 Words in s. 81(2) substituted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 2(2)(a)

F2 Word in s. 81(2) repealed (with effect in accordance with Sch. 6 para. 10(3) of the amending Act) by Finance Act 2006 (c. 25), Sch. 6 para. 10(2)(a), Sch. 26 Pt. 3(12)

F3 S. 81(2)(c) and word inserted (with effect in accordance with Sch. 6 para. 10(3) of the amending Act) by Finance Act 2006 (c. 25), Sch. 6 para. 10(2)(b)

F4 Words in s. 81(2) inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 2(2)(b)