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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 Excluded from the definition of a Qualifying Loan Relationship: contents

While TIOPA10/Part 9A/S371IG explains what a qualifying loan relationship (“QLR” - INTM217000) is, section 371IH sets out specific circumstances under which a loan cannot be a QLR. In brief these are:

  • A loan used for the purposes of a UK permanent establishment or UK property business (INTM217350)
  • The ultimate debtor is a UK resident company, unless the loan is attributed to an overseas exempt permanent establishment (INTM217400)
  • The loan relationship debits result in no CFC charge or a reduced CFC charge under the low profits exemption or the gateway chapters (INTM217450)
  • There is an arrangement for the ultimate debtor to provide funding for a loan or quasi loan to another person (modified for banking and insurance business) (INTM217500).
  • The loan is funded by a UK resident connected bank or insurance company, unless the funding is provided by way of a loan (INTM217550)
  • The loan is connected to an arrangement which gives rise to a trading deduction for a UK resident connected bank/insurance company (INTM217550)
  • There is an arrangement with a main purpose of transferring profits from existing intra-group lending out of the UK (INTM217600)
  • The loan is part of a tax-driven arrangement to refinance foreign external debt in the UK (INTM217850)