HMRC internal manual

Corporate Finance Manual

CFM42050 - Deemed loan relationships: disguised interest: exemptions

Exemptions: CTA09/S486C-E

CTA09/486C to E provide a number of exclusions from the main rules at CTA09/486B. If the conditions for an exclusion are met the disguised interest provisions will not apply.

CTA09/S486C seeks to avoid double counting. It ensures that any return (or part of a return) that is brought into account for certain other tax purposes will not be brought into account by the disguised interest rules. CFM42120 looks at this in more detail.

CTA09/S486D is a motive based test . It is an important section that means that, in order for the disguised interest rules to apply, the main purpose, or one of the main purposes, of entering into the arrangement is to obtain a ‘relevant tax advantage’. CFM42130 looks at this in more detail.

CTA09/486E deals with the notion of ‘excluded shares’. It sets out what is meant by ‘excluded share’ and provides that where the relevant conditions for a share to be an ‘excluded share’ are met, then the disguised interest rules will not apply to the interest-like return. CFM42140 to CFM42180 looks at this in more detail.