This Chapter makes provision about the debits to be brought into account for the purposes of this Part in cases where certain conditions relating to interest that is not paid or is paid late are met and there is a connection between the parties to the loan relationship.

For those conditions and the rule that applies in those cases, see section 373 (late interest treated as not accruing until paid in some cases).

For the meaning of “standing in the position of a creditor” in this Chapter, see section 379(1) (persons indirectly standing in the position of creditor).

Condition A is that the interest is not paid within the period of 12 months following the end of the accounting period in which it would be treated as accruing apart from subsection (1).

Condition B is that credits representing the full amount of the interest are not brought into account for the purposes of this Part in respect of the corresponding creditor relationship for any accounting period.

For the meaning of “corresponding creditor relationship” in cases where persons indirectly stand in the position of creditor, see section 379(2).

References in this Chapter to “the actual accrual period” are references to the accounting period in which the interest would be treated as accruing apart from subsection (1).

Section 376 applies for the interpretation of this section.

For the purposes of section 375 and this section, F13Chapter 2 of Part 10 of CTA 2010 (meaning of “close company”) applies with the omission of section 442(a) (exclusion of non-resident companies).

A person who is a participator in a company which controls another company is treated for the purposes of section 375 and this section as being a participator in that other company also.

Subject to that, in section 375 and this section “participator”, in relation to a company, means a person who is a participator in the company F16within the meaning given by section 454 of CTA 2010, but not a person who is F1such a participator just because of being a loan creditor of the company.

Section 472 (meaning of “control”) applies for the purposes of section 375 and this section.

In section 375—

• “CIS-based close company” means a company which would not be a close company apart from the rights and powers of one or more partners in a CIS limited partnership being attributed to another of the partners under F11section 451(4) to (6) of CTA 2010 because of section 448(1)(a) of that Act,

• “CIS limited partnership” means a limited partnership—

  1. a

     which is a collective investment scheme, or

  2. b

     which would be a collective investment scheme if it were not a body corporate,

• “non-qualifying territory” has the meaning given by F14section 173 of TIOPA 2010,

• F7 “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, and

• “small or medium-sized enterprise” has the meaning given by F18section 172 of TIOPA 2010.

For the purposes of section 375, 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.

Condition A is that there is a time in the actual accrual period when the company which has the debtor relationship (“D”) is the employer of employees to whom the scheme relates.

Condition B is that there is a connection between D and such an employer for the actual accrual period.

In this section “occupational pension scheme” has the meaning given in section 150(5) of FA 2004.

Section 466 (companies connected for an accounting period) applies for the purposes of this section.

For the purposes of this Chapter a person is treated as standing in the position of a creditor as respects a loan relationship if the person indirectly stands in that position by reference to a series of loan relationships or relevant money debts.

In subsection (1) “relevant money debt” means a money debt which would be a loan relationship if a company directly stood in the position of creditor or debtor.