Section 375 Loans to close companies by participators etcC1

United Kingdom

(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

F1and, 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 F2for 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 F3for 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.

F4(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.

Annotations

Textual amendments

F1: Words in s. 375(1) inserted (with effect in accordance with Sch. 20 para. 9 of the amending Act) by Finance Act 2009 (c. 10), Sch. 20 para. 3(2)
F2: Words in s. 375(3)(b) inserted (with effect in accordance with Sch. 20 para. 9 of the amending Act) by Finance Act 2009 (c. 10), Sch. 20 para. 3(3)
F3: Words in s. 375(4)(b) inserted (with effect in accordance with Sch. 20 para. 9 of the amending Act) by Finance Act 2009 (c. 10), Sch. 20 para. 3(3)
F4: S. 375(4A) inserted (with effect in accordance with Sch. 20 para. 9 of the amending Act) by Finance Act 2009 (c. 10), Sch. 20 para. 3(4)

Modifications

C1: S. 375 excluded by S.I. 2006/3296, reg. 19(1) (as substituted (with effect in accordance with reg. 1(2)(3) of the amending S.I.) by The Taxation of Securitisation Companies (Amendment) Regulations 2018 (S.I. 2018/143), regs. 1(1), 10(3))

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
C5: 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)
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 8

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)