1A

The first case is where there is, for the relevant accounting period, a connection (within the meaning of section 87 of this Act) between the debtor company and a person standing in the position of creditor as respects the loan relationship.

1B

The second case is where there is a time in the relevant accounting period when the debtor company is a close company and a person standing in the position of a creditor as respects the loan relationship is—

a

a participator in the debtor company,

b

the associate of a person who is such a participator at that time, or

c

a company of which such a participator has control or in which such a participator has a major interest,

and 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.

1C

The third case is where—

a

a person standing in the position of a creditor as respects the loan relationship is a company (“the creditor company”); and

b

there is a time in the relevant accounting period when the debtor company has a major interest in the creditor company or the creditor company has a major interest in the debtor company.

1D

The fourth case is where the loan is one made by trustees of a retirement benefits scheme (as defined in section 611 of the Taxes Act 1988) and—

a

there is a time in the relevant accounting period when the debtor company is the employer of employees to whom the scheme relates; or

b

there is for the relevant accounting period a connection, within the meaning of section 87 of this Act, between the debtor company and such an employer; or

c

a company is such an employer and there is a time in the relevant accounting period when the debtor company has a major interest in that company or that company has a major interest in the debtor company.

3

References in this paragraph to a person who stands in the position of a creditor as respects a loan relationship include references 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.

4

Where this paragraph applies in relation to a debtor relationship by virtue of sub-paragraph (3) above, the reference to the corresponding creditor relationship in sub-paragraph (2)(b) above is a reference to the creditor relationship of the person who indirectly stands in the position of a creditor as respects the debtor relationship.

5

For the purposes of this section, section 414 of the Taxes Act 1988 (meaning of “close company” in the Tax Acts) shall have effect with the omission of subsection (1)(a) (exclusion of companies not resident in the United Kingdom).

6

In this paragraph—

• “associate” has the meaning given by section 417(3) and (4) of the Taxes Act 1988;

• “control” has the same meaning as in section 87 of this Act (see section 87A);

• “participator”, in relation to a close company, means a person who, by virtue of section 417 of the Taxes Act 1988, is a participator in the company for the purposes of Part 11 of that Act, other than a person who is a participator for those purposes by virtue only of being a loan creditor of the company;

• “the relevant accounting period” means the accounting period mentioned in sub-paragraph (2)(a) above.

7

Paragraph 20 below (major interests) applies for the purposes of this paragraph.