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HMRC internal manual

Corporate Finance Manual

Loan relationships: connected parties: meaning of connection

Connection has different meanings in different contexts

In the rules on connected companies that require connected creditor and debtor companies to use the amortised cost basis, and which restrict the impairment losses that can be claimed for tax purposes, ‘connection’ means ‘control’ of one company by another, or common control of both companies. This definition of control is set out at CTA09/S472.

In the rules on late-paid interest, connection means ‘control’, but also refers to one company holding a ‘major interest’ in another, and ‘participation’ under the close company rules, and a connection with an occupational pension scheme.

The guidance explains the particular type of connection that applies in each case.