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HMRC internal manual

International Manual

HM Revenue & Customs
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Controlled Foreign Companies: The CFC charge gateway chapter 9 - exemptions for profits from qualifying loan relationships: what is a qualifying loan relationship

TIOPA10/Part 9A/S371IG(1) sets out the conditions for a loan relationship of a CFC to be treated as a qualifying loan relationship (QLR).

These are where in relation to the QLR:

INTM217050 - The Ultimate Debtor Rule - Overview

INTM217100 - The Ultimate Debtor Rule - Detailed Application

Section 371IG (1)(a) and (8) mean a Chapter 9 claim only applies to loans between non UK resident connected persons where the ultimate debtor is controlled by the same UK resident persons who control the CFC lender. Control in this context means control as defined by Chapter 18. Without this condition, the effect of allowing a Chapter 9 claim would be similar to the consequences resulting from allowing a Chapter 9 claim on loans to third parties.

The requirement for common control also prevents arrangements under which the UK takes on large amounts of debt in order to fund intra-group financing arrangements for non-UK headed groups.

Use this link to see the  example diagram of loan relationships