Section 197 Qualifying conditions for purposes of section 198

(1)

Conditions A to F are the qualifying conditions for the purposes of section 198.

(2)

Condition A is that one of the affected persons F1... has F2borrowing liabilities.

(3)

Condition B is that those liabilities are to any extent the subject of a guarantee provided by a company (“the guarantor company”).

(4)

Condition C is that, in calculating the profits and losses of the F3borrower for tax purposes, the amounts to be deducted in respect of interest or other amounts payable F4in respect of the borrowing are required to be reduced (whether or not to nil) under section 147(3) or (5).

(5)

Condition D is that that reduction is required because of section F5section 153A.

(6)

Condition E is that—

(a)

a payment (the “balancing payment”) is made, or

(b)

two or more payments (the “balancing payments”) are made,

by the guarantor company to the F6borrower.

(7)

Condition F is that the sole or main reasons for making that payment or those payments are—

(a)

that section 147(3) or (5) applies because of section F7section 153A, or

(b)

that sections 192 to 194 apply.

F8(8)

For the purposes of this Chapter, “borrowing” and “guarantee” have the meanings they have in sections 153A and 153B (see section 154).

Annotations

Textual amendments

F1: Words in s. 197(2) omitted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 11(3)(a)(i), 12
F2: Words in s. 197(2) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(3)(a)(ii), 12
F3: Word in s. 197(4) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(3)(b)(i), 12
F4: Words in s. 197(4) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(3)(b)(ii), 12
F5: Words in s. 197(5) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(3)(c), 12
F6: Word in s. 197(6) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(3)(d), 12
F7: Words in s. 197(7)(a) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(3)(e), 12
F8: S. 197(8) substituted for s. 197(8)-(10) (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(3)(f), 12

Notes on Part 4

Modifications

C1: Pt. 4 excluded by 2010 c. 4, s. 938N (as inserted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 5 para. 2)
C2: Pt. 4 excluded (1.10.2011) by Postal Services Act 2011 (c. 5), s. 93(2)(3), Sch. 2 para. 6(2); S.I. 2011/2329, art. 3
C3: Pt. 4 excluded (1.4.2012) by Budget Responsibility and National Audit Act 2011 (c. 4), s. 29, Sch. 4 para. 3(2); S.I. 2011/2576, art. 5
C4: Pt. 4 excluded (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 129(11) (with s. 147, Sch. 17)

Notes on Chapter 6

Modifications

C1: Pt. 4 Chs. 1 and 3-6 applied (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 9 paras. 3, 4