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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
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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.

Indirect connection

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’.