Taxation of loan relationships—intra-group transfers

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

  • Taxation of loan relationships—intra-group transfers
  • Conditions for continuity of treatment
  • Members of the same group
  • 75% subsidiaries
  • Effective 51% subsidiaries
  • One company replacing another as party to a loan relationship
  • Requirement to be within the charge to corporation tax
  • Continuity of tax treatment—main rule
  • Notional carrying value
  • Discounts
  • More...

Taxation of loan relationships—intra-group transfers

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?

Very broadly stated, the general rule is that a company’s profits and losses from its loan relationships are computed and brought into account for corporation tax purposes under the loan relationships rules in Part 5 of the Corporation Tax Act 2009 (CTA 2009) on the basis of its accounting measure of profit or loss. In other words, a company’s accounts, prepared in compliance with generally accepted accounting principles (GAAP), provide the basis from which the taxable and relievable items and amounts in respect of a company’s loan relationships are derived. This principle is often referred to as ‘tax following the accounts’. There are, however, several exceptions to this general principle where the loan relationships rules prescribe a departure from the accounts and require loan relationship credits and debits to be calculated on a different basis.

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