Corporation Tax Act 2009

Chapter 1 U.K. Introduction

Introduction U.K.

292 Overview of Part U.K.

(1) This Part sets out how profits and deficits arising to a company from its loan relationships are brought into account for corporation tax purposes.

(2) For the meaning of “loan relationship” see section 302 and Part 6 (relationships treated as loan relationships etc).

(3) For how such profits and deficits are calculated and brought into account, see—

(a) section 296 (profits and deficits to be calculated using credits and debits given by this Part),

(b) section 297 (trading credits and debits to be brought into account under Part 3),

(c) section 299 (charge to tax on non-trading profits),

(d) section 300 (method of bringing non-trading deficits into account),

(e) section 301 (calculation of non-trading profits and deficits from loan relationships: non-trading credits and debits), and

(f) Chapter 16 (non-trading deficits).

(4) For the priority of this Part for corporation tax purposes, see Chapter 17.

(5) This Part also contains the following Chapters (which mainly relate to the amounts to be brought into account for the purposes of this Part)—

(a) Chapter 3 (the credits and debits to be brought into account: general),

(b) Chapter 4 (continuity of treatment on transfers within groups or on reorganisations),

(c) Chapter 5 (connected companies relationships: introduction and general),

(d) Chapter 6 (connected companies relationships: impairment losses and releases of debts),

(e) Chapter 7 (group relief claims involving impaired or released consortium debts),

(f) Chapter 8 (connected parties relationships: late interest),

(g) Chapter 9 (partnerships involving companies),

(h) Chapter 10 (insurance companies),

(i) Chapter 11 (other special kinds of company),

(j) Chapter 12 (special rules for particular kinds of securities),

(k) Chapter 13 (European cross-border transfers of business),

(l) Chapter 14 (European cross-border mergers),

(m) Chapter 15 (tax avoidance),

(n) Chapter 18 (general and supplementary provisions).

(6) This Part needs to be read with Part 19 (general exemptions).

293 Construction of references to profits or losses from loan relationships U.K.

(1) In this Part references to profits or losses from loan relationships include references to profits or losses from related transactions.

(2) For the meaning of “related transaction” see section 304.

(3) Except where the context indicates otherwise, in this Part references to profits or losses from loan relationships include references to profits or losses of a capital nature.

294 Matters treated as loan relationships U.K.

(1) Part 6 deals with matters treated for some or all purposes as loan relationships or rights, payments or profits under loan relationships.

(2) Except where the context indicates otherwise, references to this Part in this Act and elsewhere in the Tax Acts include references to Part 6.

How profits and deficits from loan relationships are dealt with U.K.

295 General rule: profits arising from loan relationships chargeable as income U.K.

(1) The general rule for corporation tax purposes is that all profits arising to a company from its loan relationships are chargeable to tax as income in accordance with this Part.

(2) But see section 465 (exclusion of distributions except in tax avoidance cases).

296 Profits and deficits to be calculated using credits and debits given by this Part U.K.

Profits and deficits arising to a company from its loan relationships are to be calculated using the credits and debits given by this Part.

297 Trading credits and debits to be brought into account under Part 3 U.K.

(1) This section applies so far as in any accounting period a company is a party to a loan relationship for the purposes of a trade it carries on.

(2) The credits in respect of the relationship for the period are treated as receipts of the trade which are to be brought into account in calculating its profits for that period.

(3) The debits in respect of the relationship for the period are treated as expenses of the trade which are deductible in calculating those profits.

(4) So far as subsection (3) provides for any amount to be deductible, it has effect despite anything in—

(a) section 53 (capital expenditure),

(b) section 54 (expenses not wholly and exclusively for trade and unconnected losses), or

(c) section 59 (patent royalties).

(5) This section is subject to—

(a) section 330 (debits in respect of pre-trading expenditure),

(b) section 482(1) (under which credits or debits to be brought into account under Chapter 2 of Part 6 (relevant non-lending relationships) are treated as non-trading credits or debits), and

(c) section 494(2A) of ICTA (under which some credits and debits affecting ring-fence profits from petroleum extraction activities are treated as non-trading credits and debits).

298 Meaning of trade and purposes of trade U.K.

(1) For the purposes of this Part a company is taken to be a party to a creditor relationship for the purposes of a trade it carries on only if it is a party to the relationship in the course of activities forming an integral part of the trade.

(2) For the meaning of “creditor relationship”, see section 302(5).

(3) For the purposes of this Part activities carried on by a company in the course of—

(a) any mutual trading,

(b) any mutual insurance or other mutual business which is not life assurance business, or

(c) any basic life assurance and general annuity business,

are treated as not constituting the whole or any part of a trade.

(4) Subsection (3) applies for the purposes of any other relevant enactment as it applies for the purposes of this Part.

(5) In subsection (4) “relevant enactment” means so much of any enactment as contains provision by reference to which amounts are to be brought into account for the purposes of this Part.

299 Charge to tax on non-trading profits U.K.

(1) The charge to corporation tax on income applies to any non-trading profits which a company has in respect of its loan relationships.

(2) For the meaning of a company having such profits and how they are calculated, see section 301.

300 Method of bringing non-trading deficits into account U.K.

(1) Any non-trading deficit which a company has from its loan relationships must be brought into account in accordance with Chapter 16 (non-trading deficits).

(2) For the meaning of a company having such a deficit and how it is calculated, see section 301.

(3) This section and Chapter 16 apply even if none of the company's loan relationships is regarded as a source of income as a result of this Part.

301 Calculation of non-trading profits and deficits from loan relationships: non-trading credits and debits U.K.

(1) Whether a company has non-trading profits or a non-trading deficit from its loan relationships for an accounting period is determined as follows, using the non-trading credits and non-trading debits given by this Part for the accounting period.

(2) In this Part—

(a) “non-trading credits” means credits for any accounting period in respect of a company's loan relationships that are not brought into account under section 297(2), and

(b) “non-trading debits” means debits for any accounting period in respect of a company's loan relationships that are not brought into account under section 297(3).

(3) But see also—

(a) section 330 (debits in respect of pre-trading expenditure), and

(b) section 482(1) (under which credits or debits to be brought into account under Chapter 2 of Part 6 (relevant non-lending relationships) are treated as non-trading credits or debits).

(4) A company has non-trading profits for an accounting period from its loan relationships if the non-trading credits for the period exceed the non-trading debits for the period or there are no such debits.

(5) The non-trading profits are equal to those credits, less any such debits.

(6) A company has a non-trading deficit for an accounting period from its loan relationships if the non-trading debits for the period exceed the non-trading credits for the period or there are no such credits.

(7) The non-trading deficit is equal to those debits, less any such credits.