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HMRC internal manual

Corporate Finance Manual

Loan relationships: connected companies and impairment: debtors: deemed releases of impaired debt: where impaired debt is acquired

CTA09/S361: creditor acquires impaired debt

CTA09/S361 will apply where

  • a debtor company (‘D’) is party to a loan relationship
  • another company (‘C’) becomes party to it as creditor
  • immediately after the acquisition, the debtor company and the creditor company are connected,
  • when C acquires the debt, it does so from a company with which it is unconnected
  • the consideration paid by the creditor company for the debt is less than its carrying value in the debtor company’s accounts.

At least one of two further conditions must be satisfied. These are that the transaction is not an arm’s length transaction, and D and C must be connected at some time in the period beginning four years before the acquisition, and ending 12 months before the acquisition date.

Deemed releases on or after 14 October 2009

See CFM35510 where an exemption from a deemed release under CTA09/S361 arises in respect of impaired debt acquired on or after 14 October 2009.