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HMRC internal manual

International Manual

Controlled Foreign Companies: The CFC Charge Gateway Chapter 9 - Exemptions for profits from Qualifying Loan Relationships: What is a Qualifying Loan Relationship: The Ultimate Debtor Rule - Detailed Application: Loans used for more than one purpose

Loans used for more than one purpose

For the purposes of the ultimate debtor rule a part of a loan may be treated as a separate loan. By virtue of TIOPA10/Part 9A/S371IG(6) and (7), where a loan from a CFC to a debtor A is used partly for the purposes of A’s trade and partly to fund a loan to B then there will be two loans with two ultimate debtors, A and B.

In the link to the example diagram below, CFC 1 lends to CFC 2 which acquires a loan to CFC P from CFC 3. CFC P has used the funds for qualifying purposes under section 371IH. P is the ultimate debtor in respect of the loan from CFC 1 to CFC 2.

Use this link to view example