Finance Act 1996

6 (1) This paragraph applies where for any accounting period section 87 of this Act [F1 (accounting method where parties have a connection) applies] as respects a creditor relationship of a company. U.K.

(2) The credits and debits which for that period are to be brought into account for the purposes of this Chapter F2 ... shall be computed subject to sub-paragraphs (3) to (6) [F3 and paragraphs 6A and 6B] below.

[F4 (3) An impairment loss may be brought into account for the purposes of this Chapter only in accordance with—

(a) sub-paragraph (4) below,

(b) paragraph 6A, or

(c) paragraph 6B.]

[F5 (3A) Where an impairment loss is excluded by sub-paragraph (3), no credit in respect of any reversal of the impairment shall be brought into account for the purposes of this Chapter.]

(4) [F6 An impairment loss is not excluded by sub-paragraph (3)] in relation to a liability to pay any amount to the company (“the creditor company”) under the creditor relationship where—

(a) in consideration of, or of any entitlement to, any shares forming part of the ordinary share capital of the company on whom the liability would otherwise have fallen, the creditor company treats the liability as discharged; and

(b) the condition specified in sub-paragraph (5) below is satisfied.

(5) That condition is that there would be no connection between the two companies for the accounting period in which that consideration is given if the question whether there is such a connection for that period fell to be determined, in accordance with section 87 of this Act, by reference only to times before the creditor company acquired possession of, or any entitlement to, the shares in question.

(6) Where the company ceases in the accounting period in question to be a party to the relationship—

(a) the debits brought into account for that period in respect of that relationship shall not (subject to sub-paragraph (7) below) be more than they would have been had the company not ceased to be a party to the relationship; and

(b) the credits brought into account for that period in respect of the relationship shall not (subject to that sub-paragraph) be less than they would have been in those circumstances.

(7) In determining for the purposes of sub-paragraph (6) above the debits and credits that would have been brought into account if a company had not ceased to be a party to a loan relationship, no account shall be taken of any amounts that would have accrued at times after it ceased to be a party to the relationship.

[F7 (8) Nothing in this paragraph affects the debits or credits to be brought into account for the purposes of this Chapter in respect of exchange gains or losses arising from a debt.]

Textual Amendments

F1 Words in Sch. 9 para. 6(1) substituted (with effect in accordance with s. 52(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 10 para. 22(3)

F2 Words in Sch. 9 para. 6(2) repealed (with effect in accordance with s. 52(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 10 para. 22(4), Sch. 42 Pt. 2(6)

F3 Words in Sch. 9 para. 6(2) 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. 24(2)

F4 Sch. 9 para. 6(3) substituted (with effect in accordance with s. 52(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 10 para. 22(5)

F5 Sch. 9 para. 6(3A) inserted (with effect in accordance with s. 52(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 10 para. 22(6)

F6 Words in Sch. 9 para. 6(4) substituted (with effect in accordance with s. 52(3) of the amending Act) by Finance Act 2004 (c. 12), Sch. 10 para. 22(7)

F7 Sch. 9 para. 6(8) added (24.7.2002 with effect as mentioned in s. 79(3) of the amending Act) by Finance Act 2002 (c. 23), s. 79(2), Sch. 23 Pt. 1 para. 9(3) (with Sch. 23 Pt. 3 para. 25)