Valid from 01/04/2009

Part 5 U.K. Loan Relationships

Chapter 8 U.K. Connected parties relationships: late interest

375 Loans to close companies by participators etc U.K.

(1) The case to which this section applies is where—

(a) there is a time in the actual accrual period when the close company conditions are met, and

(b) neither the CIS-based close company conditions nor the CIS limited partnership conditions are met.

(2) The close company conditions are that—

(a) the company which has the debtor relationship (“D”) is a close company, and

(b) a person (“C”) standing in the position of creditor as respects the loan relationship is—

(i) a participator in D,

(ii) the associate of a person who is participator in D,

(iii) a company of which a participator in D has control,

(iv) a company in which a participator in D has a major interest,

(v) a person who controls a company which is a participator in D,

(vi) the associate of a person within sub-paragraph (v), or

(vii) a company controlled by a person within sub-paragraph (v).

(3) The CIS-based close company conditions are that—

(a) D is a CIS-based close company at all times when the close company conditions are met,

(b) C is not resident in a non-qualifying territory at any such time, and

(c) D is a small or medium-sized enterprise for the actual accrual period.

(4) The CIS limited partnership conditions are that—

(a) the debt is one which is owed to, or to persons acting for, a CIS limited partnership,

(b) no member of that partnership is resident in a non-qualifying territory at any time in the actual accrual period,

(c) D has received written notice from the partnership containing information from which it appears that the condition in paragraph (b) is met, and

(d) D is a small or medium-sized enterprise for the actual accrual period.

(5) Section 376 applies for the interpretation of this section.