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HMRC internal manual

Corporate Finance Manual

Loan relationships: computational rules: credits and debits not brought into account

Credits and debits not brought into account

There are a number of circumstances in which amounts shown in the accounts in accordance with generally accepted accounting practice are not required to be brought into account, or are restricted, under the loan relationships rules. These are where

  • a close company releases or writes off a loan to a participator (see below);
  • debts are released as part of certain insolvency arrangements, or where there is a debt-for-equity swap (CFM33190 and CFM33200);
  • debits result from the revaluation of debt assets and in certain cases from impairment (CFM33210);
  • government investment in a company is written off (CFM33240);
  • losses are imported (CFM33250).

Release of loan to participator in a close company

Where a close company has released or written off a loan or any part of a loan made to a participator (see CTM61500), CTA09/S321A prohibits the company from bringing in any loan relationship debit for the release.

The section has effect for debt releases or write-offs on or after 24 March 2010, and puts it beyond doubt that a close company cannot have a debit in these circumstances. It does not change the income tax treatment on the person to whom the released or written-off loan was made.