D1.755 Special classes of loan relationship

Corporate tax
Corporate tax | Commentary

D1.755 Special classes of loan relationship

Corporate tax | Commentary

Special classes of loan relationship

D1.755 Special classes of loan relationship

There are four types of loan relationship with special rules. These are discounted securities, gilt-edged securities, repo and stock lending (and similar) transactions and investment life insurance contracts. Each of these is discussed in more detail below.

Discounted securities

Discounted securities of close companies

Where a deeply discounted security is issued by a close company and the conditions detailed below are met, all the debits of the issuing company in respect of the discount (referable to the relevant period) are deferred and are brought into account for the accounting period in which the security is redeemed1. Where the security is held by a participator for only part of the relevant period, the amount deferred is restricted (on a time basis) to the debit applicable to that part period2.

The necessary conditions for this rule to apply are that:


    •     the person standing in the position of a creditor at any time in an accounting period (the 'relevant period') is a participator, an associate of a participator or a company of which a participator has control3. A 'participator' has the meaning in CTA 2010, s 454 (see D3.103) but does not include a person who would only be one by virtue of the fact that he is a loan creditor or is a bank which acquired the security in the ordinary course of banking business4 and


    •     the creditor is a company resident in a non-qualifying territory (effectively a tax haven)5

The rule

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