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HMRC internal manual

Corporate Finance Manual

Deemed loan relationships: anti-avoidance: returns from partnerships: effect of CTA09/S536

Effect of CTA09/S536

This guidance applies to companies that have interests in partnerships up to 21 April 2009 

Where the relevant conditions for either CTA09/S537 or S538 are satisfied, the effect of the legislation is that:

  • the ‘interest-like’ return is to be treated as a profit from a loan relationship of the company, and
  • the credits to be brought into account are to be determined on the amortised cost basis of accounting.

Double charging

The conditions at S537 and S538 prevent double charging by S536 where:

  • Partnership profits on which the company partner is chargeable to corporation tax are allocated to the company partner for the same or any earlier period and the return is to any extent representative of those profits. In those cases, the amount of the return on which the company will be charged to tax will be reduced on a just and reasonable basis.
  • Any amounts brought into account by FA04/S131 (companies in partnership) will no longer be chargeable under that legislation but will remain to be brought into account under CTA09/PT6/CH8.