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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
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Loan relationships: meaning of loan relationship

Loan relationship

The rules in CTA09/PT5 apply to a company’s profits and deficits from its ‘loan relationships’. The statutory definition of a loan relationship is at CTA09/S302, and applies where a company

  • stands in the position of a creditor or debtor as respects any ‘money debt’, and
  • the debt arises from a transaction for the ‘lending of money’.

Both these conditions must be present for there to be a loan relationship.

Money debts arising from the lending of money

CFM31020 onwards explains in more detail what we mean by terms ‘money debt’ and ‘lending of money’.

Some money debts do not arise from the lending of money

Not all money debts arise from the lending of money. For example, trade debts do not arise from lending money. CFM31040 has more on such debts, and CFM41000 explains the tax rules for such ‘non-lending relationships’.

Money debts arising from securities

The loan relationships rules extend to cases where, although there has been no lending of money, an instrument has been issued representing the rights of the creditor in respect of a money debt, that is, a ‘security’ is issued. See CFM31060.

References to profits and losses from loan relationships include references to profits and losses from ‘related transactions’ (CTA09/S304). Related transactions are the disposal or acquisition of rights under a loan relationship. See CFM31130.

Creditor and debtor relationships

A creditor relationship is any loan relationship where the company is the creditor, that is, the lender of money, or the purchaser or holder of a security issued by another person. A debtor relationship is conversely any loan relationship where the company is the debtor, that is, the borrower of money, or issuer of a security.