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HMRC internal manual

Company Taxation Manual

Tax elected funds (TEFs): breaches of conditions: breach of the loan creditor condition

Breach of the loan creditor condition

If a TEF breaches the loan creditor condition (explained at CTM48915) then the manager of the fund should follow the information requirements explained at the beginning of the general provisions for breaching a condition, covered in CTM48962.

General consequences of such a breach

If, on receipt of the information above, HMRC is content that the breach was inadvertent and the fund rectifies the breach within 28 days of the fund becoming aware of the breach, then the TEF can continue to remain in the regime under regulation 69Z67(2) SI2006/964 (unless there is a multiple breach of the same condition - explained in CTM48962 or a multiple breach of separate conditions - explained in CTM48965).

If the breach is inadvertent but that the breach has not been rectified within 28 days or there have been three breaches of the same condition in regulation 69Z47 (see CTM48915) in a 10 year period beginning on the first day of the accounting period that the fund became aware of the first of the breaches, then under regulation 69Z67(3)&(4) SI2006/964 a termination notice will be issued by HMRC. See CTM48971 for further information on termination notices.