Connected parties for loan relationships

By Tolley
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The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Connected parties for loan relationships
  • Definition of ‘connected’
  • Use of amortised cost basis of accounting
  • Impairment losses and connected parties
  • Close company loans to participators
  • Late interest

Special rules apply if a company (A) is in a loan relationship with another company (B), and these companies are connected at any point during the accounting period.

CTA 2009, s 348; CFM35010
Definition of ‘connected’

A company is connected with another person for an accounting period if that person is a company and, at any time in that accounting period, one of the companies had control of the other or both were under the control of the same person.

CTA 2009, s 466; CFM35030

For this purpose, control of a company means the power of a person to secure that the affairs of the company are conducted in accordance with his wishes:

  • by means of holding shares or the possession of voting power (in the company or any other company), or
  • by virtue of powers conferred by the articles of association or any other document

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