SCHEDULES

SCHEDULE 20Loan relationships: connected parties

Section 407

6

1

Section 407 (postponement until redemption of debits for connected companies' deeply discounted securities) is amended as follows.

2

In subsection (1)—

a

in paragraph (b), after “company” insert “ (“the creditor company” ,

b

omit the “and” at the end of paragraph (d), and

c

insert at the end

, and

f

the condition in subsection (1A) is met.

3

After that subsection insert—

1A

The condition is that the creditor company is—

a

resident for tax purposes in a non-qualifying territory at any time in the relevant period, or

b

effectively managed in a non-taxing non-qualifying territory at any such time.

4

Insert at the end—

6

For the purposes of this section—

a

“non-qualifying territory” has the meaning given by paragraph 5E of Schedule 28AA to ICTA,

b

a non-qualifying territory is “non-taxing” if companies are not under its law liable to tax by reason of domicile, residence or place of management, and

c

“resident for tax purposes” means liable, under the law of the non-qualifying territory, to tax there by reason of domicile, residence or place of management.