Part 5Loan Relationships
Chapter 15Tax avoidance
Connected parties deriving benefit from creditor relationships
453Connected parties deriving benefit from creditor relationships
1
This section applies in the case of any loan relationship that is a creditor relationship of a company (“A”) if—
a
the return to A from the relationship is less than a commercial return,
b
another company (“B”) that is connected with A directly or indirectly derives any benefit as a result of any arrangements made—
i
in consequence of the relationship, or
ii
otherwise in connection with the relationship, and
c
that benefit is designed to represent some or all of the amount by which the return to A from the relationship is less than a commercial return.
2
The credits to be brought into account by A in respect of the relationship for the purposes of this Part are to be determined on the basis of fair value accounting.
3
The fair value of A’s rights under the relationship must include the fair value of the benefit which is derived by B as a result of the arrangements.
4
In determining the return to A from the relationship for the purposes of subsection (1)(a), any benefit which A derives directly or indirectly from the benefit derived by B as mentioned in subsection (1)(b) is ignored.
5
In this section—
“arrangements” includes any agreement or understanding, whether or not it is legally enforceable,
“benefit” includes value in any form, and
“commercial return” means a return on an investment of money at a commercial rate of interest.