HMRC internal manual

Corporate Finance Manual

Debt cap: intra-group short-term debt: what is a short-term finance arrangement?

This guidance applies to worldwide group periods of account ending before or straddling 1 April 2017.

Definition of a short-term loan relationship

In order that two group companies can elect that an amount payable in respect of a short-term finance arrangement is not treated as a financing expense amount for the purposes of the debt cap rules, the finance arrangement must be a short-term loan relationship.

This term only has meaning for the purposes of Part 7. The legislation dealing with loan relationships in CTA09 makes no distinction between short-term and long-term loan relationships; and a money debt that does not arise from the lending of money can nevertheless be a ‘short-term loan relationship’.

TIOPA10/S321 contains the rules under which a finance arrangement is treated as a short-term loan relationship. They provide for the situation where the finance arrangement is just a single loan relationship or money debt (see CFM92060 - 80), and where the finance arrangement is part of a more complex borrowing facility (see CFM92090).