Corporation Tax Act 2010

163 Normal commercial loans: company's results or value of assets U.K.

(1) Interest is not within section 162(4)(a) by reason only that the terms of the loan provide for the rate of interest—

(a) to be reduced if the results of the relevant company's business or any part of the business improve, or

(b) to be increased if such results worsen.

(2) Interest is not within section 162(4)(b) by reason only that the terms of the loan provide for the rate of interest—

(a) to be reduced if the value of any of the relevant company's assets increases, or

(b) to be increased if the value of any such assets decreases.

(3) Subsection (4) applies if—

(a) a loan is made to the relevant company for the purpose of facilitating the acquisition of land,

(b) the loan is made on the basis mentioned in subsection (5), and

(c) none of the land that the loan is used to acquire is acquired with a view to resale at a profit.

(4) Interest on the loan is not within section 162(4)(b) by reason only that the terms of the loan are such that the only way the loan creditor can enforce payment of an amount due is by exercising rights granted by way of security over the land that the loan is used to acquire.

(5) The basis referred to in subsection (3)(b) is that—

(a) the whole of the loan is to be applied in the acquisition of land by the relevant company or in meeting incidental costs incurred wholly and exclusively for the purpose of obtaining the loan or providing security for the loan,

(b) the payment of any amount due in connection with the loan to the person making it is to be secured on the land that the loan is used to acquire, and

(c) no other security is to be required for the payment of any such amount.

(6) “Incidental costs” means expenditure on fees, commissions, advertising, printing or other incidental matters.

Modifications etc. (not altering text)

C1 Pt. 5 Ch. 6 applied (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), ss. 241(6), 381(1) (with Sch. 9 paras. 1-9, 22)

C2 Pt. 5 Ch. 6 applied (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), ss. 345(7), 381(1) (with Sch. 9 paras. 1-9, 22, 31)

C3 Pt. 5 Ch. 6 applied (with modifications) by Taxation of Chargeable Gains Act 1992 (c. 12), s. 252(10) (as substituted (with effect in accordance with s. 1184(1) of the amending Act) by 2010 c. 4, s. 1184(1), Sch. 1 para. 252 (with Sch. 2))

C4 Pt. 5 Ch. 6 applied (with modifications) by Taxation of Chargeable Gains Act 1992 (c. 12), s. 170(8) (as substituted (with effect in accordance with s. 1184(1) of the amending Act) by 2010 c. 4, s. 1184(1), Sch. 1 para. 242(4) (with Sch. 2))

C5 Pt. 5 Ch. 6 applied (with modifications) by Finance Act 2009 (c. 4), s. 772(1)(2) (as substituted (with effect in accordance with s. 1184(1) of the amending Act) by 2010 c. 4, s. 1184(1), Sch. 1 para. 646 (with Sch. 2))

C6 Pt. 5 Ch. 6 applied (with modifications) by Taxation of Chargeable Gains Act 1992 (c. 12), Sch. 7AC para. 8(2) (as substituted (with effect in accordance with s. 1184(1) of the amending Act) by 2010 c. 4, s. 1184(1), Sch. 1 para. 269(3) (with Sch. 2))