Taxation (International and Other Provisions) Act 2010

201 Pre-conditions for making election under section 202

(1) Conditions A to E are the pre-conditions for the purposes of section 202.

(2) Condition A is that both of the affected persons are companies.

(3) Condition B is that only one of the affected persons (“the advantaged person”) is a person on whom a potential advantage in relation to United Kingdom taxation is conferred by the actual provision.

(4) Condition C is that the other affected person (“the disadvantaged person”) is within the charge to income tax or corporation tax in respect of profits arising from the relevant activities (see section 216).

(5) Condition D is that the actual provision is made or imposed by means of a series of transactions which include—

(a) the issuing of a security (“the relevant security”) by one of the affected persons (“the issuing company”), and

(b) the provision of a guarantee by the other affected person.

(6) Condition E is that the capital market condition is met (see section 204).

(7) In subsections (5) and (8)(a) “security” includes securities not creating or evidencing a charge on assets.

(8) For the purposes of subsection (5), any—

(a) interest payable by a company on money advanced without the issue of a security for the advance, or

(b) other consideration given by a company for the use of money so advanced,

is to be treated as if payable or given in respect of a security issued for the advance by the company, and the reference in subsection (5) to a security is to be read accordingly.

(9) In subsection (5) the reference to a guarantee includes—

(a) a reference to a surety, and

(b) a reference to any other relationship, arrangements, connection or understanding (whether formal or informal) such that the person making the loan to the issuing company has a reasonable expectation that in the event of a default by the issuing company the person will be paid by, or out of the assets of, one or more companies.