Finance Act 1996

[F1 93A Relationships linked to the value of chargeable assets: guaranteed returns U.K.

(1) This section applies to a loan relationship which is a creditor relationship of a company if—

(a) that loan relationship and one or more other transactions are associated transactions designed to produce a guaranteed return;

(b) any such other transaction is [F2 a derivative contract falling within paragraph 6 of Schedule 26 to the Finance Act 2002 (“an associated derivative contract”)]; and

(c) the guaranteed return comprises the return consisting of the amount that must be paid to discharge the money debt arising in connection with that loan relationship taken together with the return from any one or more of [F3 the associated derivative contracts].

(2) For the purposes of this section a loan relationship of a company and one or more [F4 associated derivative contracts] are transactions designed to produce a guaranteed return if, taking the transactions together, it would be reasonable to assume, from considering—

(a) the likely effect of the transactions,

(b) the circumstances in which the transactions are entered into, or in which any of them is entered into, or

(c) the matters in both of paragraphs (a) and (b),

that the main purpose of the transactions, or one of their main purposes, is or was the production of a guaranteed return from the loan relationship and [F5 any one or more of the associated derivative contracts].

(3) For the purposes of this section a guaranteed return is produced from the loan relationship and [F6 any one or more of the associated derivative contracts] wherever (taking all the transactions together) risks from fluctuations in the underlying subject matter are so eliminated or reduced as to produce a return from the transactions—

(a) F7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) which equates, in substance, to the return on an investment of money at interest.

(4) For the purposes of subsection (3) above the cases where risks from fluctuations in the underlying subject matter are eliminated or reduced shall be deemed to include any case where the main reason, or one of the main reasons, for the choice of that subject matter is—

(a) that there appears to be no risk that that subject matter will fluctuate; or

(b) that the risk that it will fluctuate appears to be insignificant.

(5) In this section—

(a) the references, in relation to a loan relationship, to the underlying subject matter are references to the value of chargeable assets of a particular description to which that relationship is linked;

[F8 (b) the references, in relation to an associated derivative contract, to the underlying subject matter are to be construed in accordance with paragraphs 6(2)(a) and 11 of Schedule 26 to the Finance Act 2002.]

(6) Subsection (5)(a) above is to be construed in accordance with section 93 above.

(7) F9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

Textual Amendments

F1 S. 93A inserted (24.7.2002 with effect as mentioned in s. 76(2) of the amending Act) by Finance Act 2002 (c. 23), s. 76(1)

F2 Words in s. 93A(1)(b) substituted (with effect in relation to accounting periods beginning on or after 1.10.2002 subject to Sch. 28 of the amending Act) by Finance Act 2002 (c. 23), s. 83, Sch. 27 para. 18(2)(a)

F3 Words in s. 93A(1)(c) substituted (with effect in relation to accounting periods beginning on or after 1.10.2002 subject to Sch. 28 of the amending Act) by Finance Act 2002 (c. 23), s. 83, Sch. 27 para. 18(2)(b)

F4 Words in s. 93A(2) substituted (with effect in relation to accounting periods beginning on or after 1.10.2002 subject to Sch. 28 of the amending Act) by Finance Act 2002 (c. 23), s. 83, Sch. 27 para. 18(3)(a)

F5 Words in s. 93A(2) substituted (with effect in relation to accounting periods beginning on or after 1.10.2002 subject to Sch. 28 of the amending Act) by Finance Act 2002 (c. 23), s. 83, Sch. 27 para. 18(3)(b)

F6 Words in s. 93A(3) substituted (with effect in relation to accounting periods beginning on or after 1.10.2002 subject to Sch. 28 of the amending Act) by Finance Act 2002 (c. 23), s. 83, Sch. 27 para. 18(4)(a)

F7 S. 93A(3)(a) repealed (with effect in relation to accounting periods beginning on or after 1.10.2002 subject to Sch. 28 of the repealing Act) by Finance Act 2002 (c. 23), ss. 83, 141, Sch. 27 para. 18(4)(b), Sch. 40 Pt. 3(13)

F8 S. 93A(5)(b) substituted (with effect in relation to accounting periods beginning on or after 1.10.2002 subject to Sch. 28 of the amending Act) by Finance Act 2002 (c. 23), s. 83, Sch. 27 para. 18(5)

F9 S. 93A(7) repealed (with effect in relation to accounting periods beginning on or after 1.10.2002 subject to Sch. 28 of the repealing Act) by Finance Act 2002 (c. 23), ss. 83, 141, Sch. 27 para. 18(6), Sch. 40 Pt. 3(13)