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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
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Loan relationships: connected companies: indirect connection

Series of loan relationships

CTA09/S348 applies to connections between the company and a person ‘standing in the position’ of debtor or creditor. Section 348(3) and (5) explains that this includes a person who ‘indirectly stands in that position by reference to a series of loan relationships’.


AV Ltd controls BX Ltd. If AV Ltd lent money directly to BX Ltd there would be a connection under CTA09/S466.

CS Ltd is not connected to either AV Ltd or BX Ltd within CTA09/S466.

AV Ltd lends £50,000 to CS Ltd. CS Ltd then lends £50,000 to BX Ltd on identical terms. By virtue of CTA09/S348, in relation to AV’s loan relationship, BX Ltd stands indirectly in the position of debtor through a series of loan relationships, and there is therefore a connection, for the purposes of the rules in Part 5 CTA09 in respect of

  • the creditor loan relationship between AV Ltd indirectly to BX Ltd, and conversely
  • the debtor loan relationship between BX Ltd indirectly from AV Ltd.

Individuals and partnerships

An individual or a non-corporate partnership borrowing or lending money as intermediaries in the course of a series of transactions won’t have a loan relationship - only companies have loan relationships. CTA09/S348 ensures that there can still be a series of loan relationships where partnerships or individuals are involved, by including in the definition, ‘money debts that would be loan relationships if a company stood directly in the position of creditor or debtor’.

Individuals and partnerships: series of loan relationships: example

V Ltd lends money to Ms D, who then lends it to Mr Y who in turn lends it to E Ltd. V Ltd and E Ltd are connected, but neither is connected with Ms D, nor Mr Y.

V Ltd has a loan relationship with Ms D because

  • it is a company
  • it is a creditor for a money debt arising from the lending of money.

While Ms D has a money debt, she cannot have a creditor loan relationship with Mr Y because neither is a company. The insertion of a money debt that is not a loan relationship between Ms D and Mr Y would break the series, if not for the provision in CTA09/S348.

In this example, the money debt would be a loan relationship if a company replaced Ms D and Mr Y. So, as a result of S348(5), E Ltd stands indirectly in the position of debtor in relation to V Ltd’s loan relationship in this series of loans.

Note that there are no consequences for Ms D.