Section 375 — Corporation Tax Act 2009: Loans to close companies by participators etc

Loans to close companies by participators etc 375 1 The case to which this section applies is where—

a there is a time in the actual accrual period when the close company conditions are met, and b neither the CIS-based close company conditions nor the CIS limited partnership conditions are met and, where subsection (4A) applies, the non-qualifying territory condition is met.

2 The close company conditions are that—

a the company which has the debtor relationship (“D”) is a close company, and b a person (“C”) standing in the position of creditor as respects the loan relationship is—

i a participator in D, ii the associate of a person who is participator in D, iii a company of which a participator in D has control, iv a company in which a participator in D has a major interest, v a person who controls a company which is a participator in D, vi the associate of a person within sub-paragraph (v), or vii a company controlled by a person within sub-paragraph (v).

3 The CIS-based close company conditions are that—

a D is a CIS-based close company at all times when the close company conditions are met, b C is not resident for tax purposes in a non-qualifying territory at any such time, and c D is a small or medium-sized enterprise for the actual accrual period.

4 The CIS limited partnership conditions are that—

a the debt is one which is owed to, or to persons acting for, a CIS limited partnership, b no member of that partnership is resident for tax purposes in a non-qualifying territory at any time in the actual accrual period, c D has received written notice from the partnership containing information from which it appears that the condition in paragraph (b) is met, and d D is a small or medium-sized enterprise for the actual accrual period. 4A This subsection applies if C is a company; and the non-qualifying territory condition is that C is—

a resident for tax purposes in a non-qualifying territory at any time in the actual accrual period, or b effectively managed in a non-taxing non-qualifying territory at any such time.

5 Section 376 applies for the interpretation of this section.