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Corporation Tax Bill


Corporation Tax Bill
Part 5 — Loan Relationships
Chapter 3 — The credits and debits to be brought into account: general

142

 

(b)   

if the company was the debtor under the loan relationship, it must

bring into account for the later period a credit equal to the decrease for

the purposes of this Part.

(4)   

Subsections (2) and (3) do not apply so far as the credit or debit falls to be

brought into account apart from this section.

5

(5)   

In this section “the amount outstanding in respect of the loan relationship”

means so much of the recognised deferred income or recognised deferred loss

from the loan relationship as has not been represented by credits or debits

brought into account under this Part in respect of the relationship.

(6)   

In subsection (5)—

10

“recognised deferred income”, in relation to a loan relationship, means the

amount recognised in the company’s balance sheet in accordance with

generally accepted accounting practice as deferred income in respect of

the profits which arose from the relationship or a related transaction in

the cessation period, and

15

“recognised deferred loss”, in relation to a loan relationship, means the

amount so recognised as deferred loss in respect of the losses which so

arose.

319     

General power to make regulations about changes in accounting policy

(1)   

The Treasury may by regulations make provision for cases where there is a

20

change of accounting policy in drawing up a company’s accounts from one

period of account to the next which affects the amounts to be brought into

account for accounting purposes in respect of the company’s loan

relationships.

(2)   

The regulations may provide for any credits or debits which would otherwise

25

be brought into account for the purposes of this Part—

(a)   

not to be brought into account,

(b)   

to be brought into account only to a prescribed extent, or

(c)   

to be brought into account over a prescribed period or in prescribed

circumstances.

30

(3)   

Regulations under this section may, in particular, modify the operation of

sections 315 to 318.

(4)   

The regulations may make—

(a)   

different provision for different cases, and

(b)   

incidental, supplemental, consequential and transitional provision and

35

savings.

(5)   

The regulations may apply to periods of account beginning before they are

made, but not earlier than the beginning of the calendar year in which they are

made.

Rules differing from generally accepted accounting practice

40

320     

Credits and debits treated as relating to capital expenditure

(1)   

This section applies if generally accepted accounting practice allows a credit or

debit for an accounting period in respect of a company’s loan relationship to

 
 

Corporation Tax Bill
Part 5 — Loan Relationships
Chapter 3 — The credits and debits to be brought into account: general

143

 

be treated in the company’s accounts as an amount brought into account in

determining the value of a fixed capital asset or project.

(2)   

Despite that treatment, the credit or debit is to be brought into account for the

purposes of this Part, for the accounting period in which it is given, in the same

way as a credit or debit which is brought into account in determining the

5

company’s profit or loss for that period in accordance with generally accepted

accounting practice.

(3)   

But subsection (2) does not apply to a debit which is taken into account in

arriving at the amount of expenditure in relation to which a debit may be given

by Part 8 (intangible fixed assets).

10

(4)   

Subsections (5) and (6) apply if a debit is brought into account as mentioned in

subsection (2).

(5)   

No debit may be brought into account in respect of the writing down of so

much of the value of the asset or project as is attributable to that debit.

(6)   

No debit may be brought into account in respect of so much of any

15

amortisation or depreciation as represents a writing off of the interest

component of the asset.

321     

Credits and debits recognised in equity

(1)   

This section applies if in accordance with generally accepted accounting

practice a credit or debit for a period in respect of a company’s loan

20

relationship—

(a)   

is recognised in equity or shareholders’ funds, and

(b)   

is not recognised in any of the statements mentioned in section 308(1).

(2)   

The credit or debit is to be brought into account for the period for the purposes

of this Part in the same way as a credit or debit which is brought into account

25

in determining the company’s profit or loss for the period in accordance with

generally accepted accounting practice.

322     

Release of debts: cases where credits not required to be brought into account

(1)   

This section applies if—

(a)   

a liability to pay an amount under a company’s debtor relationship is

30

released, and

(b)   

the release takes place in an accounting period for which an amortised

cost basis of accounting is used in respect of that relationship.

(2)   

The company is not required to bring into account a credit in respect of the

release for the purposes of this Part if condition A, B or C is met.

35

(3)   

Condition A is that the release is part of a statutory insolvency arrangement.

(4)   

Condition B is that the release is—

(a)   

in consideration of shares forming part of the ordinary share capital of

the debtor company, or

(b)   

in consideration of any entitlement to such shares.

40

(5)   

Condition C is that—

(a)   

the debtor company meets one of the insolvency conditions (see

subsection (6)), and

 
 

Corporation Tax Bill
Part 5 — Loan Relationships
Chapter 3 — The credits and debits to be brought into account: general

144

 

(b)   

the debtor relationship is not a connected companies relationship (see

section 348).

(6)   

For the purposes of this section a company meets the insolvency conditions

if—

(a)   

it is in insolvent liquidation,

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(b)   

it is in insolvent administration,

(c)   

it is in insolvent administrative receivership,

(d)   

an appointment of a provisional liquidator is in force in relation to the

company under section 135 of the Insolvency Act 1986 (c. 45) or Article

115 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405

10

(N.I. 19)), or

(e)   

under the law of a country or territory outside the United Kingdom

circumstances corresponding to those mentioned in paragraph (a), (b),

(c) or (d) exist.

(7)   

Section 323 applies for the interpretation of subsection (6).

15

(8)   

For further cases where no credit in respect of the release is to be brought into

account, see—

(a)   

section 358 (exclusion of credits on release of connected companies

debts: general), and

(b)   

section 359 (exclusion of credits on release of connected companies

20

debts during creditor’s insolvency).

323     

Meaning of expressions relating to insolvency etc

(1)   

For the purposes of section 322(6) a company is in insolvent liquidation during

the period—

(a)   

beginning when it goes into liquidation at a time when its assets are

25

insufficient for the payment of its debts and other liabilities and the

expenses of the winding up, and

(b)   

ending when the winding up is completed or otherwise brought to an

end (whether under paragraph 37 or 38 of Schedule B1 to the

Insolvency Act 1986 (c. 45) or otherwise).

30

(2)   

In subsection (1) “liquidation” has the meaning given in—

(a)   

section 247(2) of the Insolvency Act 1986, or

(b)   

Article 6(2) of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/

2405 (N.I. 19)).

(3)   

For the purposes of section 322(6) a company in administration is in insolvent

35

administration if it entered administration under—

(a)   

Schedule B1 to the Insolvency Act 1986, or

(b)   

Schedule B1 to the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/

2405 (N.I. 19)),

   

at a time when its assets were insufficient for the payment of its debts and other

40

liabilities and the expenses of the administration.

(4)   

For the purposes of section 322(6) a company is in insolvent administrative

receivership if—

(a)   

an appointment of an administrative receiver is in force in relation to

the company, and

45

 
 

Corporation Tax Bill
Part 5 — Loan Relationships
Chapter 3 — The credits and debits to be brought into account: general

145

 

(b)   

the company was put into administrative receivership at a time when

its assets were insufficient for the payment of its debts and other

liabilities and the expenses of administrative receivership.

(5)   

In subsection (4) “administrative receiver” has the same meaning as in—

(a)   

Chapter 1 or 2 of Part 3 of the Insolvency Act 1986 (c. 45), or

5

(b)   

Part 4 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405

(N.I. 19)),

   

and “administrative receivership” is to be read accordingly.

324     

Restriction on debits resulting from revaluation

(1)   

No debit is to be brought into account for the purposes of this Part as a result

10

of the revaluation of an asset representing a creditor relationship of a company

except—

(a)   

an impairment loss, or

(b)   

a debit resulting from a release by the company of any liability under

the relationship.

15

(2)   

For the meaning of “impairment loss” see section 476(1).

(3)   

The reference in subsection (1) to revaluation of an asset includes any case

where a provision or allowance is made by the company reducing the carrying

value of the asset or of a group of assets including the asset in question.

(4)   

This section does not affect the debits to be brought into account in respect of

20

exchange gains or losses.

(5)   

This section does not apply if fair value accounting is used.

325     

Restriction on credits resulting from reversal of disallowed debits

(1)   

No credit is to be brought into account for the purposes of this Part in respect

of the reversal of a debit disallowed by section 324(1).

25

(2)   

This section does not apply if fair value accounting is used.

(3)   

See also paragraph 61 of Schedule 2 (restriction on bringing into account

credits resulting from reversal of debits disallowed in a period of account

beginning before 1 January 2005).

326     

Writing off government investments

30

(1)   

This section applies if a government investment in a company is written off by

the release of a liability to pay any amount under a debtor relationship of the

company.

(2)   

The company is not required to bring into account a credit for the purposes of

this Part in respect of the release.

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(3)   

Section 400(7) and (8) of ICTA (write-off of government investment) applies for

interpreting the reference in subsection (1) to a government investment in a

company being written off as it applies for the purposes of section 400(1) of that

Act.

 
 

 
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