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HMRC internal manual

Corporate Finance Manual

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HM Revenue & Customs
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Deemed loan relationships: overview

Relationships treated as loan relationships: overview

CTA09/S302 defines a loan relationship as

  • a money debt, that
  • arises from a transaction for the lending of money.

Money debts that do not involve the lending of money are referred to a ‘relevant non-lending relationships’ (CTA09/PT6/CH2). The legislation deals separately with

  • relevant non-lending relationships that do not involve discounts (CTA09/S479) - in summary, debts on which interest, foreign exchange differences, and impairment losses arise, or trade debts which are released;
  • relevant non-lending relationships that do involve discounts (CTA09/S480).

CTA09/S481 applies the loan relationships rules in CTA09/PT5 to these relevant non-lending relationships.

CFM41020 to CFM41090 explains the rules on money debts other than discounts.

CFM41100 to CFM41130 explains the rules on discounts.

Excluded money debts

Money debts taxable under CTA09/PT5/CH2 do not include amounts taxable under the corporation tax rules on derivative contracts rules (CFM50000) or intangible assets (CIRD10000).

Extended definition of ‘money debt’ relating to exchange gains and losses

CTA098/S483 treats currency and certain kinds of provisions as money debts, as far as exchange differences are concerned. But certain exchange differences are specifically excluded. See CFM41130 for more details.

Interest includes imputed interest

CTA09/S484 ensures that amounts imputed on a money debt under the transfer pricing rules in TIOPA10/Part 4 (for example, where a UK company is required to impute a market rate of interest on a low interest or interest-free loan it makes to a connected company) is treated as interest under CTA09/PT6/CH2 (CFM41020). See INTM51600 for more on the transfer pricing rules. (CTA09/S444 deals with imputed interest on a loan relationship - CFM38140).

For periods beginning before 1 April 2004, this rule covered interest, but not any other profit, gain or loss, or charge or expense, imputed by ICTA88/SCH28AA.

No separate rules for discounts

For accounting periods beginning before 15 March 2005, discounts not arising from loan relationships were taxable for CT purposes under Case III of Schedule D (ICTA88/S18(3A). This was repealed for accounting periods beginning after 15 March 2005.