SCHEDULE 9 Loan relationships: special computational provisions
Deeply discounted securities where companies have a connection
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(1)
This paragraph applies as respects any accounting period (“the relevant period”) where—
(a)
a debtor relationship of a company (“the issuing company”) is represented by a F1deeply discounted security issued by that company;
F2(b)
at any time in that period another company stands in the position of a creditor as respects that security;
(c)
for that period there is a connection between the issuing company and the other company; and
(d)
credits representing the full amount of the discount that is referable to that period are not for any accounting period brought into account for the purposes of this Chapter in respect of the corresponding creditor relationship.
(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 is brought into account for the accounting period in which the security is redeemed, instead of for the relevant period.
(3)
References in this paragraph to the amount of the discount that is referable to the relevant 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 this paragraph) would for the relevant period be brought into account for the purposes of this Chapter in the case of the issuing company.
F3(4)
In this paragraph “deeply discounted security” has the same meaning as in Chapter 8 of Part 4 of the Income Tax (Trading and Other Income) Act 2005 (see section 430); and the provisions of that Chapter 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 section 430 of that Act.
(5)
For the purposes of this paragraph there is a connection between one company and another for the relevant period if (subject to the following provisions of this paragraph)—
(a)
(b)
there is a time in that period F6. . . when both the companies have been under the control of the same person.
(6)
F7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7)
F7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F8F9(8)
Any reference in this paragraph to a company which stands in the position of a creditor as respects a F10deeply discounted security includes a reference to a company which 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.
(8A)
Where this paragraph applies by virtue of sub-paragraph (8) above, the reference to the corresponding creditor relationship in sub-paragraph (1)(d) above is a reference to the creditor relationship of the company which indirectly stands in the position of a creditor as respects the F11deeply discounted security.
F12(9)
For the purposes of this paragraph “control”, in relation to a company, has the same meaning as in section 87 of this Act (see section 87A).
(10)
Paragraph 20 below (major interests) applies for the purposes of this paragraph.