Part 6Relationships treated as loan relationships etc

Chapter 2Relevant non-lending relationships

Application of Part 5 to relevant non-lending relationships

481Application of Part 5 to relevant non-lending relationships

(1)

If a company has a relevant non-lending relationship—

(a)

Part 5 (loan relationships) applies in relation to the relevant matters (see subsections (3) and (5)) as it applies in relation to such matters arising under or in relation to a loan relationship, but

(b)

the only credits or debits to be brought into account for the purposes of that Part in respect of the relationship are those relating to those matters.

(2)

Accordingly, subject to subsection (1)(b), references in the Corporation Tax Acts to a loan relationship include a reference to a relevant non-lending relationship.

(3)

The relevant matters in the case of a relevant non-lending relationship within section 479 are—

(a)

interest payable to or by the company in respect of the relevant non-lending relationship,

(b)

exchange gains or losses arising to the company as a result of the relationship,

(c)

in the case of a debt on which interest is payable to the company, profits (but not losses) arising to the company from any related transaction in respect of the right to receive interest,

(d)

in the case of a debt in relation to which an impairment loss arises to the company in respect of an unpaid business payment, the impairment, and

(e)

in the case of a debt in relation to which a credit in respect of the reversal of an impairment loss arises to the company in respect of a previously unpaid business payment, the reversal.

(4)

In subsection (3) “business payment” has the meaning given in section 479(3).

(5)

The relevant matters in the case of a relevant non-lending relationship within section 480 are—

(a)

the matters referred to in subsection (3),

(b)

the discount arising to the company from the money debt,

(c)

profits (but not losses) arising to the company from any related transaction,

(d)

any impairment arising to the company in respect of the discount, and

(e)

any reversal of any such impairment.

(6)

Subsection (7) applies if a company—

(a)

has a relevant non-lending relationship within section 479 because of a debt on which interest is payable to the company, but

(b)

enters into a related transaction in respect of the right to receive interest as a result of which interest is not so payable.

(7)

Even though the interest is not payable to the company, for the purpose of bringing credits into account in respect of that or any other related transaction as a result of the application of subsection (3)(c), the company is still treated as having a relevant non-lending relationship within section 479.

(8)

Section 480(5) (when discount arises) applies for the purpose of this section as it applies for the purposes of section 480.

482Miscellaneous rules about amounts to be brought into account because of this Chapter

(1)

Any credits or debits which—

(a)

relate to interest payable under the Tax Acts, and

(b)

fall to be brought into account because of this Chapter,

are treated for the purposes of Part 5 as non-trading credits or debits.

(2)

The credits to be brought into account for the purposes of that Part in respect of a discount arising from a money debt under a relevant non-lending relationship are to be determined using an amortised cost basis of accounting.