Loan relationships—anti-avoidance: related transactions not at arm's length
Loan relationships—anti-avoidance: related transactions not at arm's length

The following Tax practice note provides comprehensive and up to date legal information covering:

  • Loan relationships—anti-avoidance: related transactions not at arm's length
  • Loan relationships transactions not at arm's length—the rule
  • Arm's length—definition
  • Exceptions
  • Exception: application of transfer pricing rules
  • Exception: intra-group transactions
  • Exception: creation of the loan relationship
  • Exception: debits on acquisition for less than market value
  • Exception: foreign exchange gains and losses (FOREX)
  • Non-market loans—accounting periods beginning on or after 1 April 2016
  • More...

Loan relationships—anti-avoidance: related transactions not at arm's length

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marks the end of the Brexit transition/implementation period entered into following the UK’s withdrawal from the EU. At this point in time (referred to in UK law as ‘IP completion day’), key transitional arrangements come to an end and significant changes begin to take effect across the UK’s legal regime. This document contains guidance on subjects impacted by these changes. Before continuing your research, see Practice Note: What does IP completion day mean for Tax?

The general rule is that the credits (broadly, but not necessarily, profits) and debits (broadly, but not necessarily, losses) arising to a company from its corporate finance transactions which are to be brought into account for tax purposes under the loan relationships regime are computed in accordance with those recognised in determining a company's profit or loss (as disclosed in the company's relevant accounts) for an accounting period in accordance with generally accepted accounting practice (ie the tax follows the accounts).

For more on the basic computational rules that permeate the loan relationships regime, and its general reliance on GAAP, see Practice Note: Taxation of loan relationships.

There are, however, a number of specific circumstances in which the tax rules necessarily depart from this basic reliance on the company's accounting treatment—ie the loan relationship regime incorporates

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