Discounted securities of close companiesU.K.
18(1)This paragraph applies for any accounting period [F1 (“the relevant period”)] where—U.K.
(a)a debtor relationship of a close company [F2 (“the issuing company”)] is represented by a relevant discounted security issued by the company; F3...
[F4(b)at any time in that period there is a person who stands in the position of a creditor as respects that security and who at that time is—]
(i)a participator in the company;
(ii)an associate of such a participator; or
(iii)a company of which such a participator has control [F5; and
(c)the debt is not one that is owed to, or to persons acting for, a limited partnership which is a collective investment scheme within the meaning of section 235 of the Financial Services and Markets Act 2000.]
[F6(1A)But for any such accounting period this paragraph shall not apply in relation to that debtor relationship if—
(a)at all times in the period when there is such a person as is described in sub-paragraph (1)(b) above, that person is a company; and
(b)credits representing the full amount of the discount that is referable to the period are brought into account for the purposes of this Chapter in respect of the corresponding creditor relationship.]
[F7(2)The debits falling in the case of the issuing company to be brought into account for the purposes of this Chapter in respect of the loan relationship shall be adjusted so that every debit relating to the amount of the discount that is referable to the relevant period (“the relevant debits”) is brought into account for the accounting period in which the security is redeemed, instead of for the relevant period.
This sub-paragraph does not apply where the relevant period is the accounting period in which the security is redeemed.
(2A)Where at some (but not all) times in the relevant period there is such a person as is described in sub-paragraph (1)(b) above—
(a)part only of the relevant debits shall be brought into account in accordance with sub-paragraph (2) above; and
(b)that part is the part which bears to the whole of the relevant debits the proportion which the part of the relevant period for which there is such a person bears to the whole of that period.]
[F8(2B)References in this paragraph to the amount of the discount that is referable to an accounting period are references to the amount relating to the difference between—
(a)the issue price of the security, and
(b)the amount payable on redemption,
which (apart from sub-paragraphs (2) and (2A) above) would for that accounting period be brought into account for the purposes of this Chapter in the case of the issuing company.]
[F9(2C)Any reference in this paragraph to a person who stands in the position of a creditor as respects a relevant discounted security [F10includes a reference to a person who indirectly stands in that position by reference to a series of loan relationships or money debts which would be loan relationships if a company directly stood in the position of creditor or debtor].
(2D)Where this paragraph applies by virtue of sub-paragraph (2C) above, the reference to the corresponding creditor relationship in sub-paragraph (1A)(c) above is a reference to the creditor relationship of the person who indirectly stands in the position of a creditor as respects the relevant discounted security.]
(3)In this paragraph “relevant discounted security” has the same meaning as in Schedule 13 to this Act; and the provisions of that Schedule shall apply for the purposes of this paragraph for determining the difference between the issue price of a security and the amount payable on redemption as they apply for the purposes of paragraph 3(3) of that Schedule.
[F11(3A)For the purposes of this paragraph there is a connection between one company and another for an accounting period if—
(a)there is a time in that period when one of the companies has had control of the other, or
(b)there is a time in that period when both the companies have been under the control of the same person.
(3B)In this paragraph “control”, in relation to a company, has the same meaning as in section 87 of this Act (see section 87A).]
[F12(3C)A person who is a participator in a company which controls another company shall be treated for the purposes of this paragraph as also being a participator in that other company.]
(4)In this paragraph—
“associate” has the meaning given in section 417(3) and (4) of the Taxes Act 1988;
F13... ; and
“participator” [F14, in relation to a company,] means a person who, by virtue of section 417 of that Act, is a participator in the company for the purposes of Part XI of that Act, other than a person who is a participator for those purposes [F15by reason only that he is a loan creditor of the company.]
(5)In determining whether a person who carries on a business of banking is a participator in a company for the purposes of this paragraph, there shall be disregarded any securities of the company acquired by him in the ordinary course of his business.
Textual Amendments
F1Words in Sch. 9 para. 18(1) 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. 34(2)(a)
F2Words in Sch. 9 para. 18(1)(a) 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. 34(2)(b)
F3Word in Sch. 9 para. 18(1) repealed (24.7.2002 with effect as mentioned in s. 82(2) of the repealing Act) by Finance Act 2002 (c. 23), ss. 82(1), 141, Sch. 25 Pt. 1 para. 34(2)(c), Sch. 40 Pt. 3(12)
F4Words in Sch. 9 para. 18(1)(b) 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. 34(3)
F5Sch. 9 para. 18(1)(c) and preceding word added (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. 34(4)
F6Sch. 9 para. 18(1A) 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. 34(5)
F7Sch. 9 para. 18(2)(2A) substituted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) for Sch. 9 para. 18(2) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 34(6) (with Sch. 25 Pt. 3 para. 63)
F8Sch. 9 para. 18(2B) 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. 34(7)
F9Sch. 9 para. 18(2C)(2D) 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. 34(8)
F10Words in Sch. 9 para. 18(2C) substituted (with effect in accordance with Sch. 37 para. 5(4)(5) of the amending Act) by Finance Act 2003 (c. 14), Sch. 37 para. 5(2)
F11Sch. 9 para. 18(3A)(3B) 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. 34(9)
F12Sch. 9 para. 18(3C) inserted (with effect in accordance with Sch. 37 para. 5(4)(5) of the amending Act) by Finance Act 2003 (c. 14), Sch. 37 para. 5(3)
F13In Sch. 9 para. 18(4) definition of "control" repealed (24.7.2002 with effect as mentioned in s. 82(2) of the repealing Act) by Finance Act 2002 (c. 23), ss. 82(1), 141, Sch. 25 Pt. 1 para. 34(10), Sch. 40 Pt. 3(12)
F14In Sch. 9 para. 18(4) words in definition of "participator" 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. 34(11)(a)
F15In Sch. 9 para. 18(4) words in definition of "participator" 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. 34(11)(b)
Modifications etc. (not altering text)
C1Sch. 9 para. 18 modified (27.7.1999) by 1999 c. 16, s. 81(10)