Modifications etc. (not altering text)
C1Pt. 5 applied (with effect in accordance with Sch. 24 paras. 13-16 of the amending Act) by Finance Act 2009 (c. 10), Sch. 24 para. 15(2)(3)
C2Pt. 5 applied (with modifications) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 990(5), 1184(1) (with Sch. 2)
C3Pt. 5 modified (15.11.2011 for specified purposes, 30.3.2012 for E.W.) by Localism Act 2011 (c. 20), ss., 240(5)(o), Sch. 24 para. 5; S.I. 2012/628, art. 3(b)
C4Pt. 5 modified (1.4.2012) by Budget Responsibility and National Audit Act 2011 (c. 4), s. 29, Sch. 4 para. 2; S.I. 2011/2576, art. 5
C5Pt. 5 modified (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 88(1)(2)(7) (with s. 147, Sch. 17)
C6Pt. 5 modified (30.9.2013) by The BRB (Residuary) Limited (Tax Consequences) Order 2013 (S.I. 2013/2242), arts. 1, 7
C7Pt. 5 modified (with effect in accordance with reg. 1(2)(3) of the amending S.I.) by The Taxation of Regulatory Capital Securities Regulations 2013 (S.I. 2013/3209), regs. 1(1), 11(3)-(6)
C8Pt. 5 modified by 2010 c. 4, s. 356NC(1)-(4) (as inserted (1.4.2014) by Finance Act 2014 (c. 26), Sch. 16 paras. 4, 6)
C9Pt. 5 modified by 2010 c. 4, s. 356NB(1)-(4) (as inserted (1.4.2014) by Finance Act 2014 (c. 26), Sch. 16 paras. 4, 6)
C10Pt. 5 modified by 2007 c. 3, s. 809FZZ(9) (as inserted (with effect in accordance with s. 37(4) of the amending Act) by Finance Act 2016 (c. 24), s. 37(2))
C11Pt. 5 modified by 2010 c. 4, s. 676AG(1) (as inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 75)
Textual Amendments
F1S. 465A and cross-heading inserted (8.4.2010) by Finance Act 2010 (c. 13), Sch. 19 para. 1
(1)The Treasury may by regulations make provision for cases where, in consequence of a change in accounting standards, there is a relevant accounting change.
(2)“Change in accounting standards” means the issue, revocation, amendment or recognition of, or withdrawal of recognition from, an accounting standard by an accounting body.
(3)“Relevant accounting change” means a change in the way in which a company is permitted or required, for accounting purposes, to recognise amounts which—
(a)are brought into account by the company as credits or debits for any period for the purposes of this Part, or
(b)would be so brought into account but for any provision made by or under this Part.
(4)Regulations under subsection (1) may amend this Part (apart from this section).
(5)Regulations under subsection (1) may—
(a)make different provision for different cases,
(b)make incidental, supplemental, consequential and transitional provision and savings, and
(c)make provision subject to an election or other specified circumstances.
(6)Regulations making consequential provision by virtue of subsection (5)(b) may, in particular, include provision amending a provision of the Corporation Tax Acts.
(7)Regulations under subsection (1) may apply to a pre-commencement period if they make provision in relation to a relevant accounting change which may or must be adopted, for accounting purposes, for a period of account, or part of a period of account, which coincides with that pre-commencement period.
(8)In this section—
“accounting body” means the International Accounting Standards Board or the Accounting Standards Board, or a successor body to either of those Boards;
“accounting standard” includes any statement of practice, guidance or other similar document;
“pre-commencement period”, in relation to regulations, means an accounting period, or part of an accounting period, which begins before the regulations are made.]
Textual Amendments
F2S. 465B and cross-heading inserted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 52
(1)This section applies for the purposes of this Part.
(2)“Tax-adjusted carrying value”, in relation to the asset or liability representing a loan relationship, means the carrying value of the asset or liability recognised for accounting purposes, except as provided by subsection (8).
(3)For the purposes of this section the “carrying value” of the asset or liability includes amounts recognised for accounting purposes in relation to the loan relationship in respect of—
(a)accrued amounts,
(b)amounts paid or received in advance, or
(c)impairment losses (including provisions for bad or doubtful debts).
(4)For the meaning of “impairment loss” see section 476(1).
(5)In determining the tax-adjusted carrying value of an asset or liability in a period of account of a company, it is to be assumed that the accounting policy applied in drawing up the company's accounts for the period was also applied in previous periods of account.
(6)But if the company's accounts for the period are in accordance with generally accepted accounting practice drawn up on an assumption as to the accounting policy in previous periods of account which differs from that mentioned in subsection (5), that different assumption applies in determining the tax-adjusted carrying value of the asset or liability in the period.
(7)In determining the tax-adjusted carrying value of an asset or liability at a time other than the end (or beginning) of a period of account of a company, it is to be assumed that a period of account of the company had ended at the time in question.
(8)In determining the tax-adjusted carrying value of the asset or liability, the provisions specified in subsection (9) apply as they apply for the purposes of determining the credits and debits to be brought into account under this Part.
(9)Those provisions are—
(a)section 308(1A) (amounts recognised in other comprehensive income and transferred to profit and loss),
(b)sections 311 and 312 (amounts not fully recognised for accounting purposes),
(c)section 320A (amounts recognised in other comprehensive income and not transferred to profit and loss),
(d)section 323A (substantial modification: cases where credits not required to be brought into account),
[F3(da)section 323B (insurers in financial difficulties: write-down orders),]
(e)section 324 (restriction on debits resulting from revaluation),
(f)section 325 (restriction on credits resulting from reversal of disallowed debits),
(g)sections 333 and 334 (company ceasing to be UK resident and non-UK company ceasing to hold loan relationship for UK permanent establishment),
(h)Chapter 4 (continuity of treatment on transfers within groups or organisations),
(i)section 349(2) (application of amortised cost basis of accounting to connected companies relationships),
(j)section 352 (disregard of related transactions),
(k)section 352A (exclusion of credits on reversal of disregarded loss),
[F4(ka)section 352B (eliminating tax mismatch for loan relationships with qualifying link),]
(l)section 354 (exclusion of debits for impaired or released connected companies debts),
(m)section 360 (exclusion of credits on reversal of impairments of connected companies debts),
(n)sections 361 to 363 (deemed debt releases on impaired debts becoming held by connected company),
(o)Chapter 8 (connected parties relationships: late interest),
(p)section 382 (company partners using fair value accounting),
(q)sections 399 to 400C (treatment of index-linked gilt-edged securities),
(r)section 404 (restriction on deductions etc relating to FOTRA securities),
(s)sections 406 to 412 (deeply discounted securities and close companies),
(t)section 415(2) (loan relationships with embedded derivatives),
(u)Chapter 13 (European cross-border transfers of business), and
(v)Chapter 14 (European cross-border mergers).]
Textual Amendments
F3S. 465B(9)(da) inserted (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), s. 32(4)
F4S. 465B(9)(ka) inserted (with effect in accordance with Sch. 12 paras. 3, 4 of the amending Act) by Finance Act 2019 (c. 1), Sch. 12 para. 2
(1)This section and sections 467 to 471 have effect for the purposes of any provisions of this Part which apply this section (but this does not affect the application of section 1316(1) (meaning of “connected” persons) for other purposes of this Part).
(2)There is a connection between a company (“A”) and another company (“B”) for an accounting period if there is a time in the period when—
(a)A controls B,
(b)B controls A, or
(c)A and B are both controlled by the same person.
(3)But A and B are not taken to be controlled by the same person just because they have been under the control of—
(a)the Crown,
(b)a Minister of the Crown,
(c)a government department,
(d)a Northern Ireland department,
(e)a foreign sovereign power, or
(f)an international organisation.
(4)Subsection (2) is subject to section 468 (connection between companies to be ignored in some circumstances).
(5)For a case where companies are treated as if one controlled the other, see section 383(5) (inter-partnership lending between connected company partners etc).
(6)Section 472 (meaning of “control”) applies for the purposes of this section.
Modifications etc. (not altering text)
C12S. 466 applied by S.I. 2004/3256, reg. 7A(5) (as inserted (with application in accordance with reg. 1(2) of the amending S.I.) by Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) (Amendment) Regulations 2009 (S.I. 2009/1886), regs. 1(1), 5)
C13Ss. 466-471 applied by 2010 c. 4, s. 937K(8) (as inserted (with effect in accordance with Sch. 16 para. 5 of the amending Act) by Finance Act 2010 (c. 13), Sch. 16 para. 3)
C14Ss. 466-471 applied by 2010 c. 4, s. 938E(11) (as inserted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 5 para. 2)
C15Ss. 466-471 applied by 2010 c. 4, s. 357GD(11) (as inserted (with effect in accordance with Sch. 2 para. 7 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 2 para. 1(1))
C16S. 466 applied (with effect in accordance with reg. 1(2) of the amending S.I.) by S.I. 2004/3256, reg. 5ZA (as inserted by The Disregard and Bringing into Account of Profit and Losses on Derivative Contracts Hedging Acquisitions and Disposals of Shares Regulations 2022 (S.I. 2022/239), regs. 1(1), 2(4))
(1)This section applies for the purposes of the provisions which apply section 466 (“the relevant provisions”) if—
(a)a trade or business is carried on by a firm, and
(b)the firm stands in the position of a creditor or debtor as respects a money debt.
(2)The questions about connections specified in subsection (3) must be determined as if each of the partners in the firm separately (rather than the firm), stood in that position as respects the debt to the extent of that partner's appropriate share.
(3)The questions are—
(a)whether for the purposes of this Part there is a connection for the purposes of the relevant provisions between any two companies for an accounting period in the case of a loan relationship, and
(b)how far any amount is treated under this Part in any particular way as a result of there being, or not being, such a connection.
(4)For the purposes of subsection (2), a partner's “appropriate share” is the same share as the share in which any profit or loss for the accounting period in question would be apportioned to the partner in accordance with the firm's profit-sharing arrangements.
(5)The references in subsections (2) to (4) to partners do not include references to the general partner of a limited partnership which is a collective investment scheme.
Modifications etc. (not altering text)
C13Ss. 466-471 applied by 2010 c. 4, s. 937K(8) (as inserted (with effect in accordance with Sch. 16 para. 5 of the amending Act) by Finance Act 2010 (c. 13), Sch. 16 para. 3)
C14Ss. 466-471 applied by 2010 c. 4, s. 938E(11) (as inserted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 5 para. 2)
C15Ss. 466-471 applied by 2010 c. 4, s. 357GD(11) (as inserted (with effect in accordance with Sch. 2 para. 7 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 2 para. 1(1))
(1)In the case of a company (“the creditor”) which has a creditor relationship, any connection for an accounting period between the creditor and another company which stands in the position of a debtor as respects the debt is ignored for the purposes of the relevant provisions if the creditor is a party to the relationship in circumstances where—
(a)conditions A to E in section 469 (creditors who are financial traders) are met, or
(b)conditions A, B and C in section 471 (creditors who are insurance companies carrying on basic life assurance and general annuity business) are met.
(2)In subsection (1) “the relevant provisions” means any provisions of this Part which apply section 466.
(3)Subsection (4) applies if for any accounting period subsection (1) has effect in the case of a creditor relationship of a company.
(4)Subsection (1) does not apply for determining whether there is a connection between the two companies for the purposes of so much of any of the relevant provisions or of section 467 as relates to the corresponding debtor relationship.
(5)For the purposes of this section and section 469, a company is treated as standing in the position of a debtor if it indirectly stands in that position by reference to a series of loan relationships or relevant money debts.
(6)In subsection (5) “relevant money debt” means a money debt which would be a loan relationship if a company directly stood in the position of creditor or debtor.
Modifications etc. (not altering text)
C13Ss. 466-471 applied by 2010 c. 4, s. 937K(8) (as inserted (with effect in accordance with Sch. 16 para. 5 of the amending Act) by Finance Act 2010 (c. 13), Sch. 16 para. 3)
C14Ss. 466-471 applied by 2010 c. 4, s. 938E(11) (as inserted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 5 para. 2)
C15Ss. 466-471 applied by 2010 c. 4, s. 357GD(11) (as inserted (with effect in accordance with Sch. 2 para. 7 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 2 para. 1(1))
(1)This section sets out the conditions referred to in section 468(1)(a).
(2)Condition A is that the creditor disposes of or acquires assets representing creditor relationships in the course of carrying on any activities forming an integral part of a trade carried on by it in the accounting period.
(3)Condition B is that the asset representing the creditor relationship was acquired in the course of those activities.
(4)Condition C is that that asset—
(a)is listed on a recognised stock exchange at the end of that period, or
(b)is a security the redemption of which must occur within 12 months of its issue.
(5)Condition D is that there is a time in that period when assets of the same kind as the asset representing the creditor relationship are beneficially owned by persons other than the creditor.
(6)Condition E is that in that period there is not more than 3 months in total during which the equivalent of at least 30% of the assets of that kind is beneficially owned by connected companies.
(7)Section 470 supplements this section.
Modifications etc. (not altering text)
C13Ss. 466-471 applied by 2010 c. 4, s. 937K(8) (as inserted (with effect in accordance with Sch. 16 para. 5 of the amending Act) by Finance Act 2010 (c. 13), Sch. 16 para. 3)
C14Ss. 466-471 applied by 2010 c. 4, s. 938E(11) (as inserted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 5 para. 2)
C15Ss. 466-471 applied by 2010 c. 4, s. 357GD(11) (as inserted (with effect in accordance with Sch. 2 para. 7 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 2 para. 1(1))
(1)For the purposes of conditions D and E in section 469 assets are taken to be of the same kind if they—
(a)are treated as being of the same kind by the practice of any recognised stock exchange, or
(b)would be so treated if dealt with on such an exchange.
(2)For the purposes of condition E in section 469 an asset is beneficially owned by a connected company if there is a connection between—
(a)the company which beneficially owns it, and
(b)a company which stands in the position of a debtor as respects the money debt by reference to which any loan relationship represented by that asset exists.
(3)Whether there is a connection for the purposes of subsection (2) at any time in an accounting period (“the relevant time”) is determined in accordance with section 466(2), (3), (5) and (6)—
(a)applying the conditions in section 466(2) only at the relevant time, and
(b)ignoring section 468.
Modifications etc. (not altering text)
C13Ss. 466-471 applied by 2010 c. 4, s. 937K(8) (as inserted (with effect in accordance with Sch. 16 para. 5 of the amending Act) by Finance Act 2010 (c. 13), Sch. 16 para. 3)
C14Ss. 466-471 applied by 2010 c. 4, s. 938E(11) (as inserted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 5 para. 2)
C15Ss. 466-471 applied by 2010 c. 4, s. 357GD(11) (as inserted (with effect in accordance with Sch. 2 para. 7 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 2 para. 1(1))
(1)This section sets out the conditions referred to section 468(1)(b)).
(2)Condition A is that the creditor is an insurance company carrying on basic life assurance and general annuity business in the accounting period.
(3)Condition B is that the asset representing the creditor relationship [F5is matched for that period to a BLAGAB liability].
(4)Condition C is that conditions C, D and E in section 469 are met in relation to that asset.
Textual Amendments
F5Words in s. 471(3) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 159
Modifications etc. (not altering text)
C13Ss. 466-471 applied by 2010 c. 4, s. 937K(8) (as inserted (with effect in accordance with Sch. 16 para. 5 of the amending Act) by Finance Act 2010 (c. 13), Sch. 16 para. 3)
C14Ss. 466-471 applied by 2010 c. 4, s. 938E(11) (as inserted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 5 para. 2)
C15Ss. 466-471 applied by 2010 c. 4, s. 357GD(11) (as inserted (with effect in accordance with Sch. 2 para. 7 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 2 para. 1(1))
(1)This section has effect for the purposes of any provisions of this Part which apply this section (but this does not affect the application of section 1316(2) (meaning of “control”) for other purposes of this Part).
(2)For those purposes “control”, in relation to a company, means the power of a person to secure that the affairs of the company are conducted in accordance with the person's wishes—
(a)by means of the holding of shares or the possession of voting power in or in relation to the company or any other company, or
(b)as a result of any powers conferred by the articles of association or other document regulating the company or any other company.
(3)Trading shares held by a company and any voting power or other powers arising from such shares are ignored for the purposes of this section.
(4)For the purposes of subsection (3) shares held by a company are trading shares if—
(a)a profit on a sale of the shares would be treated as a trading receipt of a trade carried on by the company, and
(b)the shares are not assets [F6held by an insurance company for the purposes of its long-term business].
(5)Subsection (6) applies in the case of any firm to which section 1259 (calculation of firm's profits and losses) applies.
(6)For any accounting period of the firm, property, rights or powers held or exercisable for its purposes are treated for the purposes of this section as if—
(a)the property, rights or powers had been apportioned between, and were held or exercisable by, the partners severally, and
(b)the apportionment had been in the same shares as those in which the profit or loss of the period would be apportioned between the partners in accordance with the firm's profit-sharing arrangements.
(7)In subsection (6) the references to partners do not include references to the general partner of a limited partnership which is a collective investment scheme.
Textual Amendments
F6Words in s. 472(4)(b) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 160
Modifications etc. (not altering text)
C17S. 472 applied by 2010 c. 4, s. 357BC(10) (as inserted (with effect in accordance with Sch. 2 para. 7 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 2 para. 1(1))
(1)In this Part references to a company (“A”) having a major interest in another company (“B”) are to be read as follows.
(2)A has a major interest in B at any time if at that time—
(a)A and one other person (“C”), taken together, have control of B, and
(b)A and C each have interests, rights and powers representing at least 40% of the holdings, rights and powers as a result of which A and C are taken to have control of B.
(3)The reference in subsection (2)(b) to interests, rights and powers does not include interests, rights or powers arising from shares held by a company if—
(a)a profit on a sale of the shares would be treated as a trading receipt of a trade carried on by the company, and
(b)the shares are not assets [F7held by an insurance company for the purposes of its long-term business].
(4)Section 474 makes provision about how this section operates where connected companies or partnerships are involved.
(5)For the purposes of this section and section 474, a company (“D”) is connected with another company (“E”) if—
(a)D controls E,
(b)E controls D, or
(c)D and E are both controlled by the same company.
(6)Section 472 (meaning of “control”) applies for the purposes of this section and section 474.
(7)If two or more persons taken together have the power mentioned in section 472(2) (as read with the other provisions of section 472) as respects the affairs of a company (“B”), they are taken for the purposes of subsection (2)(a) to have control of B.
Textual Amendments
F7Words in s. 473(3)(b) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 161
Modifications etc. (not altering text)
C18S. 473 applied by 2010 c. 4, s. 937K(8) (as inserted (with effect in accordance with Sch. 16 para. 5 of the amending Act) by Finance Act 2010 (c. 13), Sch. 16 para. 3)
C19S. 473 applied by 2010 c. 4, s. 938E(11) (as inserted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 5 para. 2)
C20Ss. 473, 474 applied by 2010 c. 4, s. 357GD(11) (as inserted (with effect in accordance with Sch. 2 paras. 7, 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 2 para. 1(1))
C21Ss. 473, 474 applied by 2010 c. 4, s. 357BC(10) (as inserted (with effect in accordance with Sch. 2 paras. 7, 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 2 para. 1(1))
(1)For the purposes of section 473(2), all the interests, rights and powers of any company connected with another company are attributed to the other company before determining any question—
(a)whether two persons taken together have control of a company at any time, or
(b)whether a person has at any time interests, rights and powers representing at least 40% of the holdings, rights and powers in respect of a company.
(2)If section 1259 (calculation of firm's profits and losses) applies, any property, rights or powers held or exercisable for the purposes of the firm are treated for the purposes of section 473, as respects any time in an accounting period of the firm, on the basis of the assumptions in subsection (3).
(3)The assumptions are that—
(a)the property, rights or powers had been apportioned between, and were held or exercisable by, the partners in the firm severally, and
(b)the apportionment was in the same shares as those in which the profit or loss of the accounting period would be apportioned between the partners under the firm's profit-sharing arrangements.
(4)Subsection (5) applies if—
(a)a trade or business is carried on by a firm, and
(b)the firm stands in the position of a creditor or debtor as respects a money debt.
(5)The questions in subsection (6) are to be determined as if each of the partners in the firm separately, instead of the firm, stood in the position of a creditor or, as the case may be, a debtor as respects the money debt to the extent of that partner's appropriate share (see subsection (8)).
(6)The questions are—
(a)whether a company has a major interest in another company for an accounting period in the case of a loan relationship, or
(b)how far any amount is treated under this Part in any particular way as a result of a company having or, as the case may be, not having such a major interest.
(7)The references to partners in subsections (3) and (5) do not include a reference to the general partner of a limited partnership which is a collective investment scheme.
(8)For the purposes of subsection (5), a partner's “appropriate share” is the same share as the partner's share under the firm's profit-sharing arrangements of any profit or loss calculated in accordance with section 1259 for the accounting period in question.
Modifications etc. (not altering text)
C20Ss. 473, 474 applied by 2010 c. 4, s. 357GD(11) (as inserted (with effect in accordance with Sch. 2 paras. 7, 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 2 para. 1(1))
C21Ss. 473, 474 applied by 2010 c. 4, s. 357BC(10) (as inserted (with effect in accordance with Sch. 2 paras. 7, 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 2 para. 1(1))
C22S. 474 applied by 2010 c. 4, s. 937K(8) (as inserted (with effect in accordance with Sch. 16 para. 5 of the amending Act) by Finance Act 2010 (c. 13), Sch. 16 para. 3)
C23S. 474 applied by 2010 c. 4, s. 938E(11) (as inserted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 5 para. 2)
(1)References in this Part to exchange gains or exchange losses, in relation to a company, are references respectively to—
(a)profits or gains which arise as a result of comparing at different times the expression in one currency of the whole or some part of the valuation put by the company in another currency on an asset or liability of the company, or
(b)losses which so arise.
(2)If the result of such a comparison is that neither an exchange gain nor an exchange loss arises, for the purposes of this Part an exchange gain of nil is taken to arise in the case of that comparison.
(3)The Treasury may make provision by regulations as to the way in which exchange gains or losses are to be calculated for the purposes of this section F8... .
(4)The regulations may be made so as to apply to periods of account beginning before the regulations are made, but not earlier than the beginning of the calendar year in which they are made.
(5)Any reference in this Part to an exchange gain or loss from a loan relationship of a company is a reference to an exchange gain or loss arising to a company in relation to an asset or liability representing a loan relationship of the company.
Textual Amendments
F8Words in s. 475(3) omitted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by virtue of Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 53
Textual Amendments
F9S. 475A and cross-heading inserted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 54
(1)This section applies for the purposes of this Part.
(2)A company has a “hedging relationship” between a relevant contract (“the hedging instrument”) and an asset or liability (“the hedged item”) so far as condition A or B is met.
(3)Condition A is that the hedging instrument and the hedged item are designated as a hedge by the company.
(4)Condition B is that—
(a)the hedging instrument is intended to act as a hedge of the exposure to changes in fair value of the hedged item which is attributable to a particular risk and could affect the profit or loss of the company, and
(b)the hedged item is an asset or liability recognised for accounting purposes or is an identified portion of such an asset or liability.
(5)For the purposes of subsections (2) and (4), the liabilities of a company include its own share capital.]
Textual Amendments
F10S. 475B and cross-heading inserted (with effect in accordance with Sch. 7 para. 12 of the amending Act) by Finance Act 2016 (c. 24), Sch. 7 para. 10
(1)This section applies for the purposes of this Part.
(2)A loan relationship of a company is matched if and to the extent that—
(a)it is in a matching relationship with another loan relationship or a derivative contract of the company, or
(b)exchange gains or losses arising in relation to an asset or liability representing the loan relationship are excluded from being brought into account under regulations under section 328(4),
and “unmatched” is to be construed accordingly.
(3)A loan relationship is in a matching relationship with another loan relationship or derivative contract if one is intended by the company to act to eliminate or substantially reduce the economic risk of the other.
(4)In this section “economic risk” means a risk which can be attributed to fluctuations in exchange rates between currencies over a period of time.
(5)In this section “derivative contract” has the same meaning as in Part 7 (see section 576).]
Textual Amendments
F11S. 475C and cross-heading inserted (with effect in accordance with Sch. 20 paras. 10(a), 16 of the amending Act) by Finance Act 2019 (c. 1), Sch. 20 para. 3(1) (with Sch. 20 paras. 3(2), 19)
(1)For the purposes of this Part, a loan relationship is a “hybrid capital instrument” for an accounting period of the debtor if—
(a)the loan relationship makes provision under which the debtor is entitled to defer or cancel a payment of interest under the loan relationship,
(b)the loan relationship has no other significant equity features, and
(c)the debtor has made an election in respect of the loan relationship which has effect for the period.
(2)For the purposes of this section a loan relationship “has no other significant equity features” if under the loan relationship—
(a)there are neither voting rights in the debtor (ignoring insignificant voting rights in the debtor) nor a right to exercise a dominant influence over the debtor,
(b)any provision for altering the amount of the debt is limited to write-down or conversion events in qualifying cases, and
(c)any provision for the creditor to receive anything other than interest or repayment of the debt is limited to conversion events in qualifying cases.
(3)For the purposes of subsection (2)(a)—
(a)the loan relationship makes provision for “insignificant voting rights in the debtor” if (and only if) the voting rights of any creditor under the loan relationship are limited to one vote exercisable in relation to matters generally affecting the debtor without conferring any special advantage or other right on the creditor, and
(b)“a right to exercise a dominant influence over the debtor” means a right to give directions with respect to the debtor’s operating and financial policies with which it is obliged to comply (whether or not they are for the debtor’s benefit).
(4)For the purposes of subsection (2)(b) a “write-down event” means—
(a)a permanent release of some or all of the debt, or
(b)a reduction in the amount of the debt (including to nil) in a case where provision is made for the reduction to be temporary (whether on the meeting of conditions or the exercise of a right or otherwise).
(5)For the purposes of subsection (2) a “conversion event” means—
(a)the conversion of the loan relationship into shares forming part of the debtor’s ordinary share capital, or
(b)the conversion of the loan relationship into shares forming part of the ordinary share capital of [F12a company (“C”) which, after the conversion, has control of the debtor or would have control of the debtor if C were taken to have all the rights and interests in the debtor of any company connected with C].
F13...
(6)For the purposes of subsection (2), a loan relationship makes provision for a qualifying case if—
(a)the provision applies only in the event that there is a material risk of the debtor becoming unable to pay its debts as they fall due,
(b)the provision applies only in the event that the value of the debtor’s assets is less than the amount of its liabilities, taking into account contingent and prospective liabilities, or
(c)the provision is included in the loan relationship solely because of a need to comply with a regulatory or other legal requirement,
and, in each case, the provision in question does not include a right exercisable by the creditor.
(7)Provision is not to be regarded as failing to meet the condition in subsection (2)(b) merely because, in the case of a write-down event mentioned in subsection (4)(b), it provides for a subsequent increase in the amount of the debt (but not above the original amount).
(8)An election under this section—
(a)is irrevocable,
[F14(b)must be made before the end of the period of 6 months beginning with—
(i)the day on which the company becomes a party to the loan relationship, or
(ii)if (after becoming a party to the loan relationship) the loan relationship is amended so as to meet the conditions in subsection (1)(a) and (b), the first day of the company’s next accounting period, and
(c)has effect for the accounting period in which the day mentioned in paragraph (b)(i) or (ii) falls and for subsequent accounting periods.]
(9)But an election under this section has no effect if—
(a)the company is a party to the loan relationship directly or indirectly in consequence of, or otherwise in connection with, any arrangements (within the meaning of section 455C(2)), and
(b)the main purpose of, or one of the main purposes of, the arrangements is to secure a tax advantage for the company or any other person.]
Textual Amendments
F12Words in s. 475C(5)(b) substituted (retrospectively) by The Taxation of Hybrid Capital Instruments (Amendment of Section 475C of the Corporation Tax Act 2009) Regulations 2019 (S.I. 2019/1250), regs. 1(2), 2(1)(a) (with reg. 2(2))
F13Words in s. 475C(5) omitted (retrospectively) by virtue of The Taxation of Hybrid Capital Instruments (Amendment of Section 475C of the Corporation Tax Act 2009) Regulations 2019 (S.I. 2019/1250), regs. 1(2), 2(1)(b) (with reg. 2(2))
F14S. 475C(8)(b)(c) substituted (retrospectively) by The Taxation of Hybrid Capital Instruments (Amendment of Section 475C of the Corporation Tax Act 2009) Regulations 2019 (S.I. 2019/1250), regs. 1(2), 3 (with reg. 2(2))
Modifications etc. (not altering text)
C24S. 475C: power to amend conferred (12.2.2019) by Finance Act 2019 (c. 1), Sch. 20 para. 19(1)
(1)In this Part—
[F15“accounting policy”, in relation to a company, means the principles, bases, conventions, rules and practices that the company applies in preparing and presenting its financial statements,]
“alternative finance arrangements” has the meaning given in section 501(2),
“associate” has the meaning given by [F16section 448 of CTA 2010],
“collective investment scheme” has the meaning given by section 235 of FISMA 2000,
“debt” includes a debt the amount of which is to be ascertained by reference to matters which vary from time to time,
“equity instrument” has the meaning it has for accounting purposes,
[F17“fair value” has the meaning it has for accounting purposes,]
“gilt-edged securities” means any securities which—
are gilt-edged securities for the purposes of TCGA 1992 (see Schedule 9 to that Act), or
will be such securities on the making of any order under paragraph 1 of Schedule 9 to that Act the making of which is anticipated in the prospectus under which they are issued,
“impairment” includes uncollectability,
“impairment loss” means a debit in respect of the impairment of a financial asset,
“income statement” has the meaning it has for accounting purposes,
“international organisation” has the meaning given in subsection (2) (and also see subsection (3)),
“loan” includes any advance of money and related expressions are to be read accordingly,
“non-trading credit” and “non-trading debit” are to be read in accordance with section 301 (but also see sections 330 and 482(1)),
“profit-sharing arrangements”, in relation to a firm, has the meaning given in section 1262(4) (allocation of firm's profits or losses between partners),
[F18 “ release debit ”, in relation to a company, means a debit in respect of a release by the company of a liability under a creditor relationship of the company, ]
[F19“relevant contract” has the same meaning as in Part 7 (see section 577),]
“”, in relation to a company, means any share in the company under which an entitlement to receive distributions may arise (except as provided in section 522(6)), but does not include a share in a building society,
“statement of changes in equity” has the meaning it has for accounting purposes,
“statement of comprehensive income” has the meaning it has for accounting purposes,
“statement of income and retained earnings” has the meaning it has for accounting purposes,
“statement of recognised income and expense” has the meaning it has for accounting purposes,
“statement of total recognised gains and losses” has the meaning it has for accounting purposes,
“tax advantage”[F20, except in the expression “loan-related tax advantage”, has] the meaning given by section [F21section 1139 of CTA 2010],
“this Part” is to be read in accordance with section 294(2), and
“trade” and “purposes of trade” are to be read in accordance with section 298.
(2)In this Part “international organisation” means an organisation of which—
(a)two or more sovereign powers are members, or
(b)the governments of two or more sovereign powers are members.
(3)If, in any proceedings, any question arises whether a person is an international organisation for the purposes of any provision of this Part, a certificate issued by or under the authority of the Secretary of State stating any fact relevant to that question is conclusive evidence of that fact.
Textual Amendments
F15Words in s. 476(1) inserted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 55(a)
F16Words in s. 476(1) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 624(a) (with Sch. 2)
F17Words in s. 476(1) inserted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 55(b)
F18Definition in s. 476(1) inserted (22.4.2009 retrospective) by Finance Act 2009 (c. 10), s. 42(3)(12)
F19Words in s. 476(1) inserted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 55(c)
F20Words in s. 476(1) substituted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 55(d)
F21Words in s. 476(1) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 624(b) (with Sch. 2)
Modifications etc. (not altering text)
C25S. 476(1) definition excluded (1.3.2013) by The Building Societies (Core Capital Deferred Shares) Regulations 2013 (S.I. 2013/460), regs. 1(1), 3(1)(d) (with reg. 1(2))