Loan relationships: connected companies: what is connection?
What is connection?
CTA09/S348 applies to loan relationships of companies where there is a connection, at any time in an accounting period, between
- the debtor and the person standing in the position of creditor for the loan relationship, or
- the creditor and the person standing in the position of debtor for the loan relationship.
The phrase ‘standing in the position of creditor/debtor’ includes persons standing indirectly in that position, for example through a series of loans - see CFM35160.
In section 348 connection means ‘control’
CTA09/S466 applies for the purposes of establishing whether companies are connected. Under CTA09/S466 companies are connected where at any time in an accounting period
- one of the companies controls the other, or
- both are under common control.
‘Control’ excludes control by the Crown
However, companies are not connected where they are under the common control of the Crown, a Minister of the Crown, a government department, a Northern Ireland department, a foreign sovereign power, an international organisation, or under the common control of Scottish Ministers (S117 Scottish Act 1998).
CFM35120 has more on the meaning of ‘control’.