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Section 362 Parties becoming connected where creditor's rights subject to impairment adjustment etcC1F9

United Kingdom

(1)

This section applies if—

(a)

a company (“D”) is a party to a loan relationship as debtor, F1and

(b)

another company (“C”) which—

(i)

is a party to the loan relationship as creditor, and

(ii)

is not connected with D,

becomes connected with D, F2...

F3(c)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2)

C is treated as releasing its rights under the loan relationship when C and D become connected.

F4(3)

The amount treated as released is the amount (if any) by which the pre-connection carrying value in D's accounts exceeds the pre-connection carrying value in C's accounts.

(4)

In subsection (3)—

  • “the pre-connection carrying value in D's accounts” means the amount that would be the carrying value of the liability representing the loan relationship in D's accounts if a period of account had ended immediately before C and D became connected, and

  • “the pre-connection carrying value in C's accounts” means—

    1. (a)

      in any case where C was a party to the loan relationship as creditor on the last day of the period of account ending immediately before the one in which C and D became connected, the cost of the asset representing the loan relationship which would be given on that day on an amortised cost basis of accounting, and

    2. (b)

      in any other case, the amount or value of any consideration given by C for the acquisition of the asset representing the loan relationship.

(5)

For the purposes of subsection (4) F5no account is to be taken of—

(a)

accrued amounts, F6or

(b)

amounts paid or received in advance, F7...

(c)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F8(6)

Subsections (2) and (3) are subject to section 362A (corporate rescue: debt released shortly after connection arises).

Annotations

Textual amendments

F1

Word in s. 362(1)(a) inserted (with effect in accordance with s. 23(4) of the amending Act) by virtue of Finance Act 2012 (c. 14), s. 23(2)(a)(ii)

F2

Word in s. 362(1)(b) omitted (with effect in accordance with s. 23(4) of the amending Act) by virtue of Finance Act 2012 (c. 14), s. 23(2)(a)(ii)

F3

S. 362(1)(c) omitted (with effect in accordance with s. 23(4) of the amending Act) by virtue of Finance Act 2012 (c. 14), s. 23(2)(a)(i)

F4

S. 362(3)(4) substituted (with effect in accordance with s. 23(4) of the amending Act) by Finance Act 2012 (c. 14), s. 23(2)(b)

F5

Words in s. 362(5) substituted (with effect in accordance with s. 23(4) of the amending Act) by Finance Act 2012 (c. 14), s. 23(2)(c)(i)

F6

Words in s. 362(5)(a) inserted (with effect in accordance with s. 23(4) of the amending Act) by Finance Act 2012 (c. 14), s. 23(2)(c)(ii)

F7

S. 362(5)(c) and the word immediately preceding it omitted (with effect in accordance with s. 23(4) of the amending Act) by virtue of Finance Act 2012 (c. 14), s. 23(2)(c)(iii)

F8

S. 362(6) inserted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 38

F9

Word in s. 362 heading inserted (with effect in accordance with s. 23(4) of the amending Act) by Finance Act 2012 (c. 14), s. 23(2)(d)

Modifications

C1

Pt. 5 modified (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 88(1)(2)(7) (with s. 147, Sch. 17)

Notes on Part 5

Modifications

C1

Pt. 5 applied (with effect in accordance with Sch. 24 paras. 13-16 of the amending Act) by Finance Act 2009 (c. 10), Sch. 24 para. 15(2)(3)

C2

Pt. 5 applied (with modifications) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 990(5), 1184(1) (with Sch. 2)

C3

Pt. 5 modified (15.11.2011 for specified purposes, 30.3.2012 for E.W.) by Localism Act 2011 (c. 20), ss., 240(5)(o), Sch. 24 para. 5; S.I. 2012/628, art. 3(b)

C4

Pt. 5 modified (1.4.2012) by Budget Responsibility and National Audit Act 2011 (c. 4), s. 29, Sch. 4 para. 2; S.I. 2011/2576, art. 5

C6

Pt. 5 modified (30.9.2013) by The BRB (Residuary) Limited (Tax Consequences) Order 2013 (S.I. 2013/2242), arts. 1, 7

C7

Pt. 5 modified (with effect in accordance with reg. 1(2)(3) of the amending S.I.) by The Taxation of Regulatory Capital Securities Regulations 2013 (S.I. 2013/3209), regs. 1(1), 11(3)-(6)

C8

Pt. 5 modified by 2010 c. 4, s. 356NC(1)-(4) (as inserted (1.4.2014) by Finance Act 2014 (c. 26), Sch. 16 paras. 4, 6)

C9

Pt. 5 modified by 2010 c. 4, s. 356NB(1)-(4) (as inserted (1.4.2014) by Finance Act 2014 (c. 26), Sch. 16 paras. 4, 6)

C10

Pt. 5 modified by 2007 c. 3, s. 809FZZ(9) (as inserted (with effect in accordance with s. 37(4) of the amending Act) by Finance Act 2016 (c. 24), s. 37(2))

C11

Pt. 5 modified by 2010 c. 4, s. 676AG(1) (as inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 75)

C12

Pt. 5 modified (for the tax year 2026-27 and subsequent tax years (but in relation to investment management services whenever performed)) by 2005 c. 5, Sch. A1 para. 35(7) (as inserted by Finance Act 2026 (c. 11), s. 58(6), Sch. 11 para. 1)

Notes on Chapter 6

Modifications

C1

Pt. 5 Chs. 6-8 modified (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 601, 1184(1) (with Sch. 2)

C2

Pt. 5 applied (with modifications) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 990(5), 1184(1) (with Sch. 2)