Corporation Tax Act 2009

Company ceasing to be party to loan relationship

331 Company ceasing to be party to loan relationship

(1) This section applies if—

(a) a company ceases to be a party to a loan relationship in an accounting period (“the cessation period”),

(b) profits or losses arise to the company from the loan relationship in that period, and

(c) the credits or debits brought into account for the purposes of this Part for that period do not include credits or debits representing the whole of those profits or losses.

(2) Credits or debits in respect of so much of those profits or losses as are not represented by credits or debits brought into account for the cessation period must continue to be brought into account under this Part over one or more subsequent accounting periods (“post-cessation periods”) as in the case of a loan relationship to which the company is a party in those periods.

(3) Subsection (4) applies if any question arises how far in a post-cessation period—

(a) the company is a party to the loan relationship—

(i) for the purposes of a trade it carries on, or

(ii) for any other particular purpose or purposes, or

(b) the loan relationship is referable to a particular business the company carries on or a particular description of such business.

(4) The question is to be determined by reference to the circumstances immediately before the company ceased to be a party to the loan relationship, instead of the circumstances in the post-cessation period.

(5) Subsection (6) applies if any question arises—

(a) how far the loan relationship has a particular purpose in a post-cessation period, or

(b) whether there is a connection between the company and any other person for a post-cessation period for the purposes of this Part.

(6) The question is to be determined by reference to the circumstances in the cessation period instead of the circumstances in the post-cessation period.

332 Repo, stock lending and other transactions

(1) This section applies if—

(a) a company ceases to be a party to a loan relationship in any accounting period, for example as a result of the disposal of the rights or liabilities under the relationship under a repo or stock lending arrangement, but

(b) nonetheless, in accordance with generally accepted accounting practice, amounts in respect of the relationship are recognised in determining the profit or loss of the company for that or any subsequent accounting period.

(2) Despite ceasing to be a party to the relationship, the company must bring amounts in respect of the relationship into account for those periods for the purposes of this Part.

(3) The amounts that must be so brought into account are those that are so recognised in respect of the relationship (but subject to the provisions of this Part, including, in particular, section 307(3)).

(4) This section does not apply in relation to any amount in respect of a loan relationship which is brought into account for this Part as a result of—

(a) section 331 (company ceasing to be party to a loan relationship), or

(b) section 550 (ignoring effect on borrower of sale of securities: debtor repos, debtor quasi-repos and other arrangements).

(5) Section 331(3) and (4) applies in relation to any time after the company ceases to be a party to a loan relationship in a case where this section applies as it applies where section 331 applies.