Taxation (International and Other Provisions) Act 2010

• (7) If, in a case where subsection (6) applies, the deemed failed period does not coincide with an accounting period of another elected company (“E”), the accounting period of E is treated for the purposes of this Part as if it consisted of separate accounting periods beginning and ending at such times as secure that none of the separate accounting periods fall partly within the deemed failed period.

• (8) For this purpose “the deemed failed period” means the period consisting of the relevant times in the accounting period of C mentioned in subsection (6).

• (9) All such apportionments as are necessary for the purposes of, or in consequence of, subsections (5) to (7) are to be made on a just and reasonable basis.

• (10) If—

• (a) elected companies have made elections under section 433 which have effect for accounting periods including relevant times, and

• (b) more than half of those elected companies have each made an election under that section that has had effect for a period of at least 5 years,

section 434(3)(b) does not apply in relation to any of the elected companies.

• (11) The “earliest elected accounting period” is the accounting period which—

• (a) is the first elected accounting period of an elected company, and

• (b) begins no later than the first elected accounting period of each other elected company.

• (12) For the purposes of subsection (11), the “first elected accounting period” of an elected company is the first of the company’s accounting periods in relation to which the election is to have effect.

• (13) If there is more than one earliest elected accounting period under subsection (11) and those periods (the “relevant periods”) do not all end on the same date, the “earliest elected accounting period” is the relevant period that ends no later than each of the other relevant periods.

Meaning of “qualifying infrastructure activity”

436

• (1) For the purposes of this Chapter a company carries on a “qualifying infrastructure activity” if the company—

• (a) provides an asset that is a public infrastructure asset in relation to it (see subsections (2) and (5)), or

• (b) carries on any other activity that is ancillary to, or facilitates, the provision of an asset that is a public infrastructure asset in relation to it.

• (2) For the purposes of this Chapter an asset is a “public infrastructure asset” in relation to a company at any time if—

• (a) the asset is, or is to be, a tangible asset forming part of the infrastructure of the United Kingdom or the UK sector of the continental shelf,

• (b) the asset meets the public benefit test (see subsections (3) and (4)),

• (c) the asset has had, has or is likely to have an expected economic life of at least 10 years, and

• (d) the asset meets the group balance sheet test (see subsections (10) and (10A)) in relation to the company.

• (3) An asset meets the “public benefit test” if—

• (a) the asset is, or is to be, procured by a relevant public body, or

• (b) the asset is, or is to be, used in the course of a regulated activity.

• (4) An asset is used in the course of a “regulated activity” if its use—

• (a) is regulated by an infrastructure authority (see section 437(2)), or

• (b) could be regulated by an infrastructure authority if the authority exercised any of its powers.

• (5) For the purposes of this Chapter a building, or part of a building, is also a “public infrastructure asset” in relation to a company at any time if—

• (a) the building or part is, or is to be, let on a short-term basis —

• (i) within a UK property business carried on by the company, or another member of the worldwide group of which it is a member at that time, and

• (ii) to persons who, at that time, are not related parties of the company or member.

• (c) the building or part has had, has or is likely to have an expected economic life of at least 10 years, and

• (d) the building or part meets the group balance sheet test in relation to the company.

• (5A) But a building, or part of a building, is not a public infrastructure asset in relation to a company at a particular time if, were the building or part to be disposed of at that time, profits arising from the disposal would be charged to corporation tax as profits of a trade.

• (6) A building, or part of a building, is “let” to a person if the person is entitled to the use of the building or part under a lease or other arrangement.

• (7) A building, or part of a building, is let on a “short-term basis” if the lease or other arrangement in question—

• (a) has an effective duration which is 50 years or less, and

• (b) is not an arrangement to which any provision of Chapter 2 of Part 16 of CTA 2010 applies (finance arrangements).

• (8) Whether or not a lease or other arrangement has an effective duration which is 50 years or less is determined in accordance with Chapter 4 of Part 4 of CTA 2009 (reading any reference to a lease as a reference to a lease or other arrangement within subsection (6)).

• (9) For the purposes of this section references to a building or part of a building being let include the building or part being sub-let, and, accordingly, references to a lease include a sub-lease.

• (10) An asset meets the “group balance sheet test” in relation to a company at any time if—

• (a) an entry in respect of the asset is, or would be, recognised (whether as a tangible asset or otherwise) in a balance sheet of the company, or an associated company, that is drawn up at that time, and

• (b) the company or associated company is within the charge to corporation tax at that time in respect of all of its sources of income and no election or claim mentioned in section 433(11)(b) or (c) has effect for a period including that time.

• (10A) In determining whether the condition in subsection (10)(b) is met in relation to a company not resident in the United Kingdom at any time, a source of income of the company is ignored if, having regard to all the circumstances, it is reasonable to regard as insignificant the amount of income arising from the source for the accounting period including that time.

• (11) For the purposes of this Chapter references to provision, in relation to a public infrastructure asset, include its acquisition, design, construction, conversion, improvement, operation or repair.

Section 436: supplementary

437

• (1) In section 436 “infrastructure” includes—

• (a) water, electricity, gas, telecommunications or sewerage facilities,

• (b) oil pipelines, oil terminals or oil refineries,

• (c) railway facilities (including rolling stock), roads or other transport facilities,

• (d) health or educational facilities,

• (e) facilities or housing accommodation provided for use by members of any of the armed forces or of any police force,

• (f) court or prison facilities,

• (g) waste processing facilities, and

• (h) buildings (or parts of buildings) occupied by any relevant public body.

• (2) Each of the following is an “infrastructure authority” for the purposes of section 436(4)—

• (a) the Civil Aviation Authority so far as exercising functions in relation to the provision of airports (within the meaning of the Airports Act 1986),

• (b) each of the following so far as exercising functions in relation to waste processing—

• (i) the Environment Agency,

• (ii) the Scottish Environmental Protection Agency,

• (iii) the Northern Ireland Environment Agency, or

• (iv) Natural Resources Wales,

• (c) the Gas and Electricity Markets Authority,

• (d) each of the following so far as exercising functions in relation to the management of ports or harbours—

• (i) a harbour authority within the meaning of the Harbours Act 1964, or

• (ii) a harbour authority within the meaning of the Harbours Act (Northern Ireland) 1970,

• (e) the Northern Ireland Authority for Utility Regulation,

• (f) the Office of Communications so far as exercising functions in relation to the provision of electronic communication services (within the meaning of the Communications Act 2003) or the management of the radio spectrum,

• (g) the Office of Nuclear Regulation,

• (h) the Office of Rail and Road,

• (i) the Oil and Gas Authority,

• (j) the Water Services Regulation Authority or the Water Industry Commission for Scotland, or

• (k) any other public authority which has functions of a regulatory nature exercisable in relation to the use of tangible assets forming part of the infrastructure of the United Kingdom or the UK sector of the continental shelf.

• (3) The Commissioners may by regulations amend the definition of “infrastructure authority”.

Exemption and related provision

Exemption for interest payable to third parties etc

438

• (1) Amounts that arise to a qualifying infrastructure company in a relevant accounting period are not to be regarded for the purposes of this Part as tax-interest expense amounts of the company so far as they qualify as exempt amounts in that period (see subsections (2) and (3)).

• (2) An amount qualifies as an exempt amount so far as it is attributable, on a just and reasonable apportionment, to the times in the relevant accounting period when—

• (a) each creditor in relation to the amount is within subsection (3) or the amount is in respect of a qualifying old loan relationship (see section 439), and

• (b) the recourse of each creditor in relation to the amount is limited to relevant infrastructure matters (see subsections (4) to (6)).

• (3) A creditor is within this subsection if—

• (a) the creditor is not a related party of the company, or

• (b) the creditor is a company which is a qualifying infrastructure company,

but section 466(2) does not apply for the purposes of paragraph (a).

• (4) The recourse of a creditor is limited to relevant infrastructure matters if, in the event that the company fails to perform its obligations in question, the recourse of the creditor is limited to—

• (a) income of a qualifying infrastructure company,

• (b) assets of a qualifying infrastructure company, or

• (c) shares in or debt issued by a qualifying infrastructure company,

whether the income, assets, shares or debt relate to the company concerned or another qualifying infrastructure company.

• (5) For the purposes of subsection (4) a guarantee, indemnity or other financial assistance in favour of the creditor is ignored if—

• (a) it is provided before 1 April 2017, or

• (b) it is provided at any later time by a person who, at that time, is not a related party of the company or is a relevant public body.

• (5A) For the purposes of subsection (4) a guarantee, indemnity or other financial assistance in favour of the creditor is also ignored if—

• (a) it is provided before 29 October 2018,

• (b) the company concerned has not been UK resident at any time before that date, and

• (c) the amount concerned is in respect of a loan relationship, derivative contract or relevant arrangement or transaction (within the meaning of section 382(4)) to which the member in question is a party for the purposes of its UK property business.

• (6) For the purposes of subsection (4) a non-financial guarantee in favour of the creditor is ignored if—

• (a) it guarantees the performance by any person of contractual obligations to provide goods or services to a qualifying infrastructure company,

• (b) it is given by the person providing the goods or services or by a person who is a related party of that person, and

• (c) the maximum amount for which the guarantor is liable does not exceed the consideration given under the contract for the provision of the goods or services.

• (7) In this section “creditor” means—

• (a) if the amount meets condition A in section 382, the person who is party to the loan relationship as creditor,

• (b) if the amount meets condition B in that section, the person other than the company who is party to the derivative contract, and

• (c) if the amount meets condition C in that section, the person other than the company who is party to the relevant arrangement or transaction.

Application of section 438: certain creditors treated as qualifying infrastructure companies

438A

• (1) This section applies where—

• (a) a company (“C”), at a time in the period mentioned in subsection (1) of section 438—

• (i) is a member of the worldwide group of which the qualifying infrastructure company mentioned in that subsection is a member, but

• (ii) is not a UK group company; and

• (b) C is a creditor in relation to an amount which—

• (i) is a relevant loan relationship debit (as defined in section 383) for the debtor company, or

• (ii) would be a relevant loan relationship debit if the debtor company were UK resident.

• (2) For the purposes of section 438, C is treated in relation to the amount mentioned in subsection (1)(b) (the “relevant loan amount”) as a qualifying infrastructure company if—

• (a) throughout the period mentioned in section 438(1), C—

• (i) meets the public infrastructure income test for the accounting period (see subsections (2) to (4) of section 433) and subsection (3) of this section), and

• (ii) meets the public infrastructure assets test for the accounting period (see subsections (5) to (10) of that section and subsection (4) of this section),

(but does not satisfy the conditions in subsection (1)(c) and (d) of section 433);

• (b) the loan to which the relevant loan amount relates (the “relevant loan”) is fully funded by another loan (the “corresponding loan”) made to C for that purpose and on substantially the same terms as the relevant loan; and

• (c) amounts arising to C in respect of the corresponding loan would, if section 438(2) applied to C, qualify as “exempt amounts” within the meaning of that subsection.

• (3) For the purposes of subsection (2)(a)(i), C is also treated as meeting the public infrastructure income test for an accounting period if all, or all but an insignificant proportion, of its income for the period derives from—

• (a) anything listed in any of paragraphs (a) to (c) of section 433(2),

• (b) shares in, or debt issued by, a company that meets the test in section 433(2) for that period,

• (c) shares in or debt issued by a company that is treated as meeting the public infrastructure income test for that period by reason of this subsection.

• (4) For the purposes of subsection (2)(a)(ii), C is also treated as meeting the public infrastructure assets test for an accounting period if all, or all but an insignificant proportion, of the total value of the company's assets recognised in an appropriate balance sheet on each day in that period derives from—

• (a) anything listed in any of paragraphs (a) to (e) of section 433(5),

• (b) shares in, or debt issued by, a company that meets the test in section 433(5) for that period,

• (c) shares in or debt issued by a company that is treated as meeting the public infrastructure assets test for that period by reason of this subsection.

• (5) For the purposes of determining whether amounts arising to C would qualify as exempt amounts under section 438(2) (for the purposes of subsection (2)(c) of this section), the recourse of a creditor is treated as being limited to relevant infrastructure matters if, in the event that C fails to perform its obligations in question, the recourse of the creditor is limited to—

• (a) anything listed in paragraphs (a) to (c) of section 438(4),

• (b) shares in or debt issued by a company whose income and assets consist wholly of income and assets within those paragraphs,

• (c) shares in or debt issued by a company whose income and assets consist wholly of income and assets within paragraphs (a) or (b) of this subsection, or

• (d) shares in or debt issued by a company whose income and assets consists wholly of income and assets within paragraphs (a) to (c) of this subsection, and so on.

• (6) For the purposes of subsection (5), in determining whether a company’s income and assets consists wholly of income and assets of a particular description, any source of income or any asset is ignored if, having regard to all the circumstances, it is reasonable to regard as insignificant the amount of income arising from the source, or (as the case may be) the value of the asset recognised, in the accounting period.

Exemption in respect of certain pre-13 May 2016 loan relationships

439

• (1) A loan relationship is a “qualifying old loan relationship” of a qualifying infrastructure company if—

• (a) the company entered into the loan relationship on or before 12 May 2016, and

• (b) as at that date, at least 80% of the total value of the company's future qualifying infrastructure receipts for the qualifying period was highly predictable by reference to qualifying public contracts,

but see subsection (8) for cases where a loan relationship is not a qualifying old loan relationship of the company.

• (2) For the purposes of this section “the qualifying period” means—

• (a) in a case where the loan relationship would cease to subsist at any time before 12 May 2026 (if any amendments of the loan relationship made on or after 12 May 2016 are ignored), the period beginning with 12 May 2016 and ending with that time, and

• (b) in any other case, the period of 10 years beginning with 12 May 2016.

• (3) For the purposes of this section “qualifying infrastructure receipts”, in relation to a company (“C”), means—

• (a) receipts arising from qualifying infrastructure activities carried on by C, and

• (b) such proportion of the receipts arising from qualifying infrastructure activities carried on by another company as, on a just and reasonable basis, is attributable to C's interests in the other company (whether direct or indirect) arising as a result of shares or loans ,

but ignoring amounts that represent the reimbursement of expenses incurred by C or the other company.

• (4) For the purposes of this section receipts are highly predictable by reference to qualifying public contracts so far as their value can be predicted with a high degree of certainty because—

• (a) the amounts of the receipts are fixed by a qualifying public contract, and

• (b) the factors affecting the volume of receipts are fixed by a qualifying public contract or are otherwise capable of being predicted with a high degree of certainty.

• (5) For this purpose any provision of a qualifying public contract (however expressed) that adjusts the amount of a receipt for changes in the general level of prices or earnings is to be ignored.

• (6) For the purposes of this section a contract is a “qualifying public contract” if—

• (a) it was entered into at any time on or before 12 May 2016 and, as at that time, it was expected to have effect for at least 10 years, and

• (b) it was entered into either with a relevant public body or following bids made in an auction conducted by a relevant public body.

• (7) If a qualifying old loan relationship is amended after 12 May 2016 so as to increase the amount lent or extend the period for which the relationship is to subsist—

• (a) section 438 is to have effect as if none of those amendments were made (and, accordingly, the exemption under that section has no effect in relation to the increase in the amount or the period of the extension), and

• (b) such apportionments of amounts in respect of the relationship are to be made as are just and reasonable.

• (8) A loan relationship to which a qualifying infrastructure company is a party at any time is not a qualifying old loan relationship of the company at that or any subsequent time if, on the relevant assumptions, the condition in subsection (1)(b) would not have been met.

• (9) The relevant assumptions are that—

• (a) the assets held by the company at that time were the only assets that the company held on 12 May 2016,

• (b) the assets held at that time by any other company in which it has interests (whether direct or indirect) arising as a result of shares or loans were the only assets that the other company held on 12 May 2016, and

• (c) a qualifying infrastructure receipt could not be regarded as highly predictable if, on 12 May 2016, the public infrastructure asset in question did not exist or was not in the course of being constructed or converted.

• (10) For the purposes of this section the value of a receipt on 12 May 2016 is taken to be its present value on that date, discounted using a rate that can reasonably be regarded as one that, in accordance with normal commercial criteria, is appropriate for the purpose.

• (11) In this section “receipts” means receipts of a revenue nature.

Loans etc made by qualifying infrastructure companies to be ignored

440

• (1) This section applies where—

• (a) a company is a qualifying infrastructure company throughout an accounting period, and

• (b) the company would (but for this section) have had tax-interest income amounts in the accounting period.

• (2) For the purposes of this Part, the company is treated as if it did not have any tax-interest income amounts in the accounting period.

Tax-EBITDA of qualifying infrastructure company to be nil

441

• (1) This section applies where a company is a qualifying infrastructure company throughout an accounting period.

• (2) For the purposes of this Part, the tax-EBITDA of the company for the accounting period is nil.

Amounts of qualifying infrastructure company left out of account for other purposes

442

• (1) This section applies where a company is a qualifying infrastructure company throughout a relevant accounting period.

• (2) In calculating—

• (a) the adjusted net group-interest expense of the worldwide group for the period of account concerned, or

• (b) the qualifying net group-interest expense of the worldwide group for the period of account concerned,

amounts that are exempt amounts of the company under section 438, or are treated as mentioned in section 440, are to be left out of account.

• (3) For the purposes of this Part the group EBITDA of the worldwide group for the period of account concerned is to be calculated as if the group did not include the company in respect of the relevant accounting period.

Interest capacity for group with qualifying infrastructure company etc

443

• (1) If a worldwide group for a period of account includes a qualifying infrastructure company at any time, the general rule is that the interest capacity of the group for the period is calculated as if section 392 did not contain the de minimis provisions.

• (2) There is an exception to the general rule (see subsections (4) and (5)) which—

• (a) applies if no tax-interest income amounts of any qualifying infrastructure company (“Q”) which is a member of the group for the period are receivable from another qualifying infrastructure company which is not a member of the group for the period but is a related party of Q at any time in that period, and

• (b) depends on the comparison set out in subsection (3),

and, for the purposes of paragraph (a), tax-interest income amounts are to be ignored if, having regard to all the circumstances, it is reasonable to regard the amounts as insignificant.

• (3) The following amounts must be compared with each other—

• (a) the total disallowed amount of the group in the period calculated as if this Chapter (including subsection (1) of this section but ignoring the remainder of it) were contained in this Part (“the Chapter 8 amount”), and

• (b) the total disallowed amount of the group in the period calculated as if this Chapter were not contained in this Part and as if section 392 contained only the de minimis provisions (“the ordinary amount”).

• (4) If the Chapter 8 amount exceeds the ordinary amount, the interest capacity of the worldwide group for the period is taken to be the de minimis amount (as defined by 392(3)).

• (5) If the interest capacity of the worldwide group for the period is given by subsection (4), nothing else in this Chapter has effect in relation to the worldwide group for the period.

• (6) For the purposes of this section the reference to section 392 not containing the de minimis provisions is a reference to that section not containing subsections (2) and (3) of that section.

• (7) For the purposes of this section the reference to section 392 containing only the de minimis provisions is a reference to that section having effect as if for subsections (1) and (2) of that section there were substituted—

(1) For the purposes of this Part the “interest capacity” of a worldwide group for a period of account of the group is the de minimis amount.

Supplementary

Joint venture companies

444

• (1) This section makes modifications of this Part in relation to an accounting period of a qualifying infrastructure company (“the joint venture company”) which is the ultimate parent of a worldwide group at all times in that period where—

• (a) one or more qualifying infrastructure companies (“the qualifying investor or investors”) have shares in the joint venture company,

• (b) other persons (“the other investors”) who are not qualifying infrastructure companies have all the other shares in the joint venture company,

• (c) each of the investors (that is to say, the qualifying investor or investors and the other investors) has lent money to the joint venture company,

• (d) the amounts each of the investors has lent stand in the same, or substantially the same, proportion as the shares in the joint venture company that each of them has,

• (e) at all times in the accounting period the investors have the same rights in relation to the shares in or assets of the joint venture company and the same rights in relation to the money debt or debts in question, and

• (f) the joint venture company makes an election for the purposes of this section that has effect for the accounting period (but see section 445 for further provision about elections).

• (2) Section 401 has effect as if the qualifying investor or investors were not investors in the group for times in the accounting period falling in the relevant period of account.

• (3) Section 427 has effect as if, in determining the appropriate proportion in relation to an associated worldwide group, it is assumed that the qualifying investor or investors were not investors in the group for times in the accounting period falling in the relevant period of account.

• (4) In consequence of subsection (2) or (3), the shares of the qualifying investor or investors in the group are treated as distributed for times in the accounting period falling in the relevant period of account among the other investors in proportion to the actual shares of the other investors in the group.

• (5) For the purposes of section 438 there is a reduction in any amount that would otherwise qualify as an exempt amount in the accounting period where—

• (a) the exemption operates by reference to creditors being within subsection (3) of that section, and

• (b) the creditor in relation to the amount is not an investor.

• (6) The amount qualifying as an exempt amount is to be reduced so that only the qualifying proportion of it qualifies.

• (7) For the purposes of this section—

• “the qualifying proportion” means the proportion of the shares that the qualifying investor or investors have in the joint venture company in the accounting period, and

• “the non-qualifying proportion” means the proportion of the shares that the other investors have in the joint venture company in the accounting period.

• (8) The treatment mentioned in section 440(2) is to extend only to the qualifying proportion of the tax-interest income amounts in the accounting period.

• (9) Section 441(2) has effect as if the tax-EBITDA of the company for the accounting period were the amount determined as follows.

• Step 1 Find the tax-EBIDTA of the company for the accounting period if section 441 were ignored.

• Step 2 The tax-EBITDA of the company for the accounting period is equal to the non-qualifying proportion of that amount.

• (10) Section 442(3) has effect as if for the words “the group did not include the company” there were substituted “ amounts of the company were limited to the non-qualifying proportion of those amounts ”.

Joint venture groups

445

• (1) This section applies if the joint venture company is the ultimate parent of a multi-company worldwide group at any time in the accounting period.

• (2) An election made by the joint venture company under section 444 in relation to the accounting period is of no effect unless all the other members of the group—

• (a) are qualifying infrastructure companies for the accounting period,

• (b) are wholly-owned subsidiaries of the joint venture company throughout the accounting period, and

• (c) have the same accounting periods as the joint venture company.

• (3) In determining whether the conditions in section 444(1)(c) to (e) are met in relation to the accounting period of the joint venture company, any loans made to any of the other members of the group are treated as if they were made to the joint venture company.

• (4) If the joint venture company makes an election under section 444 for the accounting period, the modifications made by subsections (5) to (10) of that section are also to apply in relation to each of the other members of the group.

Joint ventures: supplementary

446

• (1) If—

• (a) the joint venture company makes an election under section 444 in relation to an accounting period,

• (b) that company, or any member of the worldwide group of which it is a member, is the creditor for the purposes of section 438 in any case, and

• (c) the company mentioned in that section in that case is a not a member of that group at any time in the accounting period,

section 438 has effect in that case as if subsection (3)(b) were of no effect in relation to that time.

• (2) Section 434(1) to (5) apply to an election under section 444 as they apply to an election under section 433.

• (3) For the purposes of section 444 the investors are not to be regarded as having the same rights in relation to the shares in or assets of the joint venture company, or in relation to the money debt or debts in question, at any time if—

• (a) provision is in force at that time in respect of any of the relevant matters that differs in relation to different persons or has, or is capable of having, a different effect in relation to different persons (whether at that or any subsequent time),

• (b) arrangements are in place at that time the effect of which is that, at that or any subsequent time, the rights of some persons in relation to any of the relevant matters differ, or will or may differ, from the rights of others in relation to the matters in question, or

• (c) any other circumstances exist at that time as a result of which the rights of some persons in relation to any of the relevant matters cannot reasonably be regarded as being, in substance, the same rights as others in relation to the matters in question at that or any subsequent time.

• (4) In this section—

• (a) “the relevant matters” means the shares in or assets of the joint venture company or the money debt or debts in question,

• (b) “rights” includes powers,

• (c) “different persons” includes persons of a different class or description, and

• (d) “arrangements” include any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

Partnerships and other transparent entities

447

• (1) Subsections (2) to (4) apply where a company is a member of a partnership.

• (2) For the purposes of section 433 the cases in which assets recognised in a balance sheet of the company are regarded as deriving their value from the matters mentioned in subsection (5)(a) to (e) of that section include any case where—

• (a) the company's interest in the partnership is recognised in the balance sheet of the company, and

• (b) that partnership interest derives its value from those matters.

• (3) For the purposes of section 436 the cases in which an entry in respect of an asset is (or would be) recognised in a balance sheet of the company include any case where—

• (a) the asset is (or would be) recognised in a balance sheet of the partnership, and

• (b) the company has a significant interest in the partnership.

• (4) For the purposes of section 438(4)—

• (a) the obligations mentioned there include any case where the obligations are those of the partnership, and

• (b) references to a qualifying infrastructure company in that case include the partnership.

• (5) Subsections (2) to (4) apply (with any necessary modifications) in relation to transparent entities that are not partnerships as they apply in relation to partnerships.

• (6) For the purposes of this section an entity is “transparent” if—

• (a) it is not chargeable to corporation tax or income tax as a person (ignoring any exemptions), or

• (b) it is a collective investment vehicle which is “transparent for income tax purposes” for the purposes of paragraph 8 of Schedule 5AAA to TCGA 1992 (see paragraph 8(7) of that Schedule).

Decommissioning

448

• (1) This Chapter applies in relation to an activity consisting of the decommissioning of a public infrastructure asset as it applies in relation to its provision.

• (2) In determining whether a company is a qualifying infrastructure company the following assets of the company are ignored (and the income arising from them is, accordingly, also ignored)—

• (a) any shares in a decommissioning fund, and

• (b) any loan relationships or other financing arrangements to which a decommissioning fund is party.

• (3) A decommissioning fund is to be regarded as a qualifying infrastructure company.

• (4) For the purposes of this section “a decommissioning fund” means a fund which—

• (a) holds particular investments for the sole purpose of funding activities for, or in connection with, the decommissioning or other provision of public infrastructure assets, and

• (b) is prevented from using the proceeds of the investments, or the income arising from them, for any purpose other than the purpose mentioned in paragraph (a) or returning surplus funds.

• (5) In this section “decommissioning” includes demolishing and putting out of use.

Minor definitions for purposes of this Chapter

449

• (1) For the purposes of this Chapter—

• “balance sheet” means a balance sheet that is drawn up in accordance with generally accepted accounting practice,

• “financial asset” has the same meaning as it has for accounting purposes,

• “loan relationships or other financing arrangements” means—loan relationships,derivative contracts in relation to which the condition in section 387(4) is met (underlying subject matter to be interest rates etc),finance leases, ordebt factoring or similar transactions, and

• “the UK sector of the continental shelf” means the areas designated by Order in Council under section 1(7) of the Continental Shelf Act 1964.

• (2) For the purposes of this Chapter references to a company which is “associated” with another company at any time are references to companies that are members of the same worldwide group at that time.

CHAPTER 9 — Cases involving particular types of company or business

Banking companies

Banking companies

450

• (1) This section applies in relation to a banking company carrying on a trade so far as the activities of the trade consist of or include dealing in financial instruments.

• (2) For the purposes of section 382 an amount is treated as meeting condition A, B or C if it is a debit arising directly from dealing in financial instruments other than one in respect of an impairment loss.

• (3) An amount—

• (a) which is treated as meeting condition A, B or C for the purposes of section 382 as a result of subsection (2) of this section, and

• (b) which, but for that subsection, would not be a tax-interest expense amount,

is to be left out of account, or brought into account, as a result of section 377(2) or 380(2) after the second but before the third kind of tax-interest expense amounts mentioned there.

• (4) For the purposes of section 385 an amount is treated as meeting condition A, B, C or D if it is a credit arising directly from dealing in financial instruments other than one in respect of the reversal of an impairment loss.

• (5) In determining a relevant expense amount under section 411 in the case of the company, that section has effect as if it also included a reference to losses arising directly from dealing in financial instruments other than impairment losses.

• (6) In determining a relevant income amount under section 411 in the case of the company, that section has effect as if it also included gains arising directly from dealing in financial instruments other than the reversal of impairment losses.

• (7) In this section—

• “banking company” has the same meaning as in Part 7A of CTA 2010 (see sections 269B to 269BD), and

• “financial instruments” includes—loan relationships,derivative contracts, andshares or other securities.

Oil and gas

Oil and gas

451

• (1) For the purposes of this Part any amount which is, or is taken into account in calculating—

• (a) the ring fence income of a company within the meaning of section 275 of CTA 2010, or

• (b) a company's aggregate gain or loss under section 197(3) of TCGA 1992,

is to be ignored.

• (2) For the purpose of applying subsection (1) in relation to the financial statements of a worldwide group of which the company is a member such adjustments are to be made to those statements as are just and reasonable.

REITs

Real Estate Investment Trusts

452

• (1) This section applies if a company (a “property rental business company”)—

• (a) is a company which has profits for an accounting period which are not charged to corporation tax as a result of section 534(1) or (2) of CTA 2010, or

• (b) is a company to which gains accrue in an accounting period that are not chargeable gains as a result of section 535(1) or (5) , or section 535A(2), of CTA 2010.

• (2) In this section “the residual business company” means the company which—

• (a) so far as it carries on residual business, is treated, as a result of section 541 of CTA 2010, as a separate company distinct from the property rental business company, but

• (b) ignoring that section, is in fact the same company as the property rental business company.

• (2A) In applying subsection (2) and giving effect to the remainder of this section, the company is treated, at all times in the accounting period, as carrying on a residual business within the charge to corporation tax (and, accordingly, amounts falling to be brought into account in the accounting period as a result of this section are within the charge to corporation tax).

• (3) In applying the provisions of this Part—

• (a) the property rental business company and the residual business company are at all times to be regarded as separate members of the same worldwide group (despite the provisions of section 541(3) of CTA 2010), but

• (b) in the case of the application of section 433 (qualifying infrastructure company), the property rental business company and the residual business company are to be regarded as being one company (and any election (or its revocation) is, therefore, regarded as made by each company).

• (4) This Part has effect as if—

• (a) section 534(1) and (2) of CTA 2010, and

• (b) section 535(1) and (5) , or section 535A(2), of CTA 2010,

do not apply in relation to the property rental business company for the accounting period (and, accordingly, the profits mentioned in section 534(1) or (2) of CTA 2010 are not calculated for the purposes of this Part in accordance with section 599 of that Act).

• (4A) An amount charged on the residual business company as a result of section 543 of CTA 2010 (excessive property financing costs) is treated for the purposes of this Part as if it met condition A, B, C or D for the purposes of section 385 (tax-interest income amounts).

• (5) The allocated disallowance for the property rental business company (if any) for the accounting period—

• (a) is to be taken into account in calculating the profits of the property rental business for the purposes of section 530 of CTA 2010 (condition as to distribution of profits), but

• (b) must be limited to such amount as secures that neither subsection (3)(b) nor subsection (5) of that section (distribution of profits not required if would result in unlawful distribution) applies.

• (6) This subsection—

• (a) sets out steps to be taken in order to facilitate the operation of Chapter 2 (disallowance and reactivation of tax-interest expense amounts), and

• (b) has effect in relation to an accounting period of the residual business company whether or not it has net tax-interest expense referable to that period.

If the residual business company does not have net tax-interest expense referable to that period, it is treated for the purposes of steps 1 to 4 in the rest of this subsection as if it had instead a nil amount of tax-interest expense referable to that period.

• Step 1 Determine the maximum amount that could be the allocated disallowance for the property rental business company for the accounting period if subsection (5) were ignored and the maximum amount that could be the allocated disallowance for the residual business company for the accounting period (ignoring step 5). The sum of those maximum amounts is referred to in this subsection as “the total REIT expenses”.

• Step 2 Determine the amount (if any) that is the allocated disallowance for the property rental business for the accounting period, applying subsection (5) and all other rules in this Part. This amount is referred to in this subsection as “the actual disallowed amount”.

• Step 3 Deduct from the total REIT expenses the actual disallowed amount.

• Step 4 Determine whether so much of the total REIT expenses as remains after step 3 exceeds the net tax-interest expense of the residual business company referable to the accounting period (ignoring step 5).

• Step 5 If the application of step 4 produces an excess, the residual business company is required to bring into account in the accounting period matching tax-interest expense and income amounts in accordance with the following provisions of this section.

• (7) The residual business company—

• (a) must bring a tax-interest expense amount equal to the excess into account in the accounting period, and

• (b) must bring a tax-interest income amount equal to the excess into account in the accounting period,

but nothing in this subsection affects any calculation required under any other provision of this Part in relation to the accounting period of the residual business company.

• (8) The bringing into account of a tax-interest expense amount under subsection (7) is subject to the operation of the other provisions of this Part (which may result in some or all of the amount not being brought into account).

• (9) The tax-interest expense amount under subsection (7) must be matched in amount and nature to an amount comprised in the total REIT expenses.

Section 377(2) to (4) (which, subject to an election made by the company, set out the order in which amounts are left out of account) apply for the purposes of this subsection.

• (10) The tax-interest expense or income amounts under subsection (7) are treated as being of the same nature as each other.

• (11) An interest restriction return—

• (a) must, in relation to any company carrying on residual business or property rental business, specify that fact, and

• (b) must contain information about how the return has taken into account the effect of this section.

• (12) Expressions which are used in this section and in Part 12 of CTA 2010 have the same meaning in this section as they have in that Part.

Insurance companies etc

Insurance entities

453

• (1) This section applies where—

• (a) an insurance entity is a member of a worldwide group,

• (b) the entity has a subsidiary (“S”) which it holds as a portfolio investment, and

• (c) apart from this section, S would be a member of the group.

• (2) For the purposes of this Part—

• (a) the group does not include S (or its subsidiaries), and

• (b) accordingly, none of those entities is regarded as a consolidated subsidiary of any member of the group.

• (3) For the purposes of this section an insurance entity holds an interest in an entity as “a portfolio investment” if—

• (a) the insurance entity holds the interest as an investment, and

• (b) the insurance entity judges the value that the interest has to it wholly or mainly by reference to the market value of the interest.

• (4) In this section—

• “insurance entity” means—an insurance company,a friendly society within the meaning of Part 3 of FA 2012 (see section 172), ora body corporate which carries on underwriting business as a member of Lloyd's, and

• “subsidiary” has the meaning given by international accounting standards.

Members of Lloyd's

454

In the case of a body corporate carrying on underwriting business as a member of Lloyd's—

• (a) any reference in this Part to an amount being brought into account under Part 3 of CTA 2009 as a result of section 297 or 573 of that Act is to be read as a reference to its being brought into account under that Part as a result of section 219 of FA 1994, and

• (b) any reference in this Part to a derivative contract is to be read as if subsection (3) of section 226 of FA 1994 (which provides that relevant contracts forming part of a premium trust fund are not derivative contracts) were omitted.

Investment managers

Investments held by investment managers

454A

• (1) This section applies where—

• (a) an entity (“S”) would, apart from this section, be a member of a worldwide group as a result of one or more other members of the group managing S and holding rights or interests in relation to S,

• (b) the entity managing S does so in the ordinary course of carrying on a business of providing investment management services, and

• (c) the management of S is not coordinated to any extent with the management by any person of any other entity.

• (1A) Except in a case within subsection (2), for the purposes of this Part—

• (a) the group does not include S (or its subsidiaries), and

• (b) accordingly, none of those entities is regarded as a consolidated subsidiary of any member of the group.

• (2) Where S is a partnership or another transparent entity, for the purposes of this Part—

• (a) the group does not include entities that are subsidiaries of S, and

• (b) accordingly, none of those entities is regarded as a consolidated subsidiary of any member of the group.

• (3) In this section “subsidiary” has the meaning given by international accounting standards.

Shipping companies

Shipping companies subject to tonnage tax

455

• (1) This section applies in relation to an accounting period of a tonnage tax company.

• (2) The company's tonnage tax profits for the accounting period are treated as nil for the purpose of calculating the company's adjusted corporation tax earnings for the accounting period under section 406(2).

• (3) In this section “tonnage tax company” and “tonnage tax profits” have the same meaning as in Schedule 22 to FA 2000 (see paragraphs 2 to 5).

Fair value accounting

Creditor relationships of companies determined on basis of fair value accounting

456

• (1) A company may elect for all of its creditor relationships which are dealt with on the basis of fair value accounting (“fair-value creditor relationships”) to be subject to the provision made by this section for all of its accounting periods.

• (2) For the purpose of calculating under this Part—

• (a) tax-interest expense amounts of the company, and

• (b) tax-interest income amounts of the company,

the relevant loan relationship debits and relevant loan relationship credits in respect of the company's fair-value creditor relationships are instead to be determined for the accounting periods on an amortised cost basis of accounting.

• (3) If—

• (a) a company has a hedging relationship between a relevant contract (“the hedging instrument”) and the asset representing a loan relationship subject to the election, and

• (b) the loan relationship is dealt with in the company's accounts on the basis of fair value accounting,

it is to be assumed in applying the amortised cost basis of accounting that the hedging instrument has where possible been designated for accounting purposes as a fair value hedge of the loan relationship.

• (4) An election under this section—

• (a) must be made before the end of 12 months from the end of the relevant accounting period,

• (b) has effect for that accounting period and all subsequent accounting periods, and

• (c) is irrevocable.

• (5) For this purpose “relevant accounting period” means—

• (a) the first accounting period in which the company has a fair-value creditor relationship, or

• (b) if that accounting period has ended before 1 April 2017, the first accounting period in relation to which any provision of this Part applies.

• (6) In this section “amortised cost basis of accounting”, in relation to an accounting period, has the same meaning as in Part 5 of CTA 2009 (see section 313), but, in the case of creditor relationships relating to insurance activities, as if that basis of accounting required recognition only of—

• (a) interest accrued for the period in respect of the creditor relationships, or

• (b) if the creditor relationships arise as a result of section 490 of CTA 2009 (OEICs, unit trusts and offshore funds), amounts that can reasonably be regarded as equating to interest accrued for the period in respect of those relationships.

• (7) In subsection (6) “creditor relationships relating to insurance activities” means creditor relationships which—

• (a) are held by an insurance company, a friendly society within the meaning of Part 3 of FA 2012 (see section 172) or a body corporate which carries on underwriting business as a member of Lloyd's, or

• (b) are held in connection with the regulation of underwriting business carried on by members of Lloyd's.

• (8) The Commissioners may by regulations amend the definition of “amortised cost basis of accounting” in this section.

• (9) Other expressions which are used in this section and in Part 5 of CTA 2009 have the same meaning in this section as they have in that Part.

Elections under section 456: deemed debits and credits

457

• (1) This section applies if—

• (a) as a result of an election under section 456, the tax-interest expense amounts of a company include notional debits for an accounting period,

• (b) the worldwide group of which the company is a member is subject to interest restrictions for a period of account, and

• (c) the total disallowed amount for the period of account consists of or includes the notional debits.

• (2) In order to facilitate the operation of Chapter 2 (disallowance and reactivation of tax-interest expense amounts)—

• (a) the company must bring a debit equal to the amount of the notional debits into account in the accounting period, and

• (b) the company must bring a credit equal to the amount of the notional debits into account in the accounting period,

but nothing in this subsection affects any calculation required under any other provision of this Part in relation to the accounting period of the company.

• (3) The bringing into account of a debit under subsection (2)(a) is subject to the operation of the other provisions of this Part (which may result in some or all of the debit not being brought into account).

• (4) The debits and credits under subsection (2) are of the same nature as the notional debits that give rise to them.

• (5) For the purposes of this section a debit is a “notional debit” if the debit is created as a result of the determination required by the election or so far as the amount of the debit is increased as a result of that determination.

Exemption for tax-interest expense or income amounts

Co-operative and community benefit societies etc

458

• (1) This section applies where—

• (a) apart from this section, an amount would be a tax-interest expense amount or tax-interest income amount of a company as a result of meeting condition A in section 382 or 385 (loan relationships), and

• (b) the amount meets that condition only because of section 499 of CTA 2009 (certain sums payable by co-operative and community benefit societies or UK agricultural or fishing co-operatives treated as interest under loan relationship).

• (2) The amount is treated as not being a tax-interest expense amount or tax-interest income amount of the company.

Charities

459

• (1) This section applies where—

• (a) apart from this section, an amount would be a tax-interest expense amount of a company as a result of meeting condition A in section 382 (loan relationship debits),

• (b) the creditor is a charity,

• (c) the company is a wholly-owned subsidiary of the charity, and

• (d) the charitable gift condition is met at all times during the accounting period in which the amount is (or apart from this Part would be) brought into account.

• (2) The amount is treated as not being a tax-interest expense amount of the company.

• (3) For the purposes of this section the “charitable gift condition” is met at any time at which, were the company to make a donation to the charity at that time, it would be a qualifying charitable donation (see section 190 of CTA 2010).

• (4) In this section—

• “charity” has the same meaning as in Chapter 2 of Part 6 of CTA 2010 (see section 202 of that Act as read with Schedule 6 to FA 2010), and

• “the creditor” means the person who is party to the loan relationship in question as creditor.

Leases

Long funding operating leases and finance leases

460

• (1) In calculating a company's adjusted corporation tax earnings for an accounting period under section 406(2), each of the following amounts is to be ignored—

• (a) the amount of a deduction under section 363 of CTA 2010 (lessor under long funding operating lease);

• (b) the amount by which a deduction is reduced under section 379 of CTA 2010 (lessee under long funding operating lease);

• (c) the capital component of the company's rental earnings under a finance lease which is not a long funding finance lease;

• (d) the amount of depreciation in respect of any asset leased to the company under a finance lease which is not a long funding finance lease.

• (2) The definition of “relevant capital expenditure” in section 417(2) includes the amount of depreciation in respect of any relevant asset leased under a finance lease for some or all of the relevant period of account to a company that is a member of the worldwide group in question.

• (3) For the purposes of this section the capital component of a company's rental earnings under a finance lease is so much of those earnings as do not constitute tax-interest income amounts of the company.

• (4) For the purposes of this section the amount of depreciation in respect of any asset leased to a company under a finance lease is the amount which, in accordance with generally accepted accounting practice, falls (or would fall) to be shown as depreciation in respect of the asset in the applicable accounts.

• (5) In this section “the applicable accounts” are—

• (a) in a case within subsection (1)(d), the company's accounts for any period, and

• (b) in a case within subsection (2), the financial statements of the worldwide group for the relevant period of account in question.

• (6) In this section “long funding finance lease” means a finance lease which is a long funding lease (within the meaning of section 70G of CAA 2001).

CHAPTER 10 — Anti-avoidance

Counteracting effect of avoidance arrangements

461

• (1) Any tax advantage that would (in the absence of this section) arise from relevant avoidance arrangements is to be counteracted by the making of such adjustments as are just and reasonable.

• (2) Any adjustments required to be made under this section (whether or not by an officer of Revenue and Customs) may be made by way of an assessment, the modification of an assessment, amendment or disallowance of a claim or otherwise.

• (3) For the purposes of this section arrangements are “relevant avoidance arrangements” if conditions A and B are met.

• (4) Condition A is that the main purpose, or one of the main purposes, of the arrangements is to enable a company to obtain a tax advantage.

• (5) Condition B is that the tax advantage is attributable (or partly attributable) to any company—

• (a) not leaving tax-interest expense amounts out of account that it otherwise would have left out of account,

• (b) leaving tax-interest expense amounts out of account that are lower than they otherwise would have been,

• (c) leaving tax-interest expense amounts out of account in an accounting period other than that in which it otherwise would have left them out of account,

• (d) bringing tax-interest expense amounts into account that it otherwise would not have brought into account,

• (e) bringing tax-interest expense amounts into account that are higher than they otherwise would have been, or

• (f) bringing tax-interest expense amounts into account in an accounting period other than that in which it otherwise would have brought them into account.

• (6) In subsection (5)—

• (a) references to leaving amounts out of account are to leaving them out of account under this Part;

• (b) references to bringing amounts into account are to bringing them into account under this Part.

• (7) In this section—

• “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and

• “tax advantage” includes—relief or increased relief from tax,repayment or increased repayment of tax,avoidance or reduction of a charge to tax or an assessment to tax,avoidance of a possible assessment to tax,deferral of a payment of tax or advancement of a repayment of tax, andavoidance of an obligation to deduct or account for tax.

• (8) For the purposes of the definition of “tax advantage” any reference to tax includes—

• (a) any amount chargeable as if it were corporation tax or treated as if it were corporation tax, and

• (b) diverted profits tax.

CHAPTER 11 — Interpretation etc

Related parties

Expressions relating to “related parties”: introduction

462

• (1) Section 463 sets out the circumstances in which a person is a related party of another person for the purposes of this Part.

• (2) That section—

• (a) applies generally in relation to any amount, and

• (b) is supplemented by sections 464 and 465 (which contain provisions that have effect for the purposes of that section).

• (3) Sections 466 and 467 make provision for treating persons as if they were related parties of each other but only in relation to certain matters.

• (4) Sections 468 to 472—

• (a) make provision for treating persons as if they were not related parties of each other but only in relation to certain matters, and

• (b) take priority over sections 466 and 467.

Whether a person is generally a “related party” of another

463

• (1) For the purposes of this Part a person (“A”) is a “related party” of another person (“B”)—

• (a) throughout any period for which A and B are consolidated for accounting purposes,

• (b) on any day on which the participation condition is met in relation to them, or

• (c) on any day on which the 25% investment condition is met in relation to them.

• (2) A and B are consolidated for accounting purposes for a period if—

• (a) their financial results for a period are required to be comprised in group accounts,

• (b) their financial results for the period would be required to be comprised in group accounts but for the application of an exemption, or

• (c) their financial results for a period are in fact comprised in group accounts.

• (3) In subsection (2) “group accounts” means accounts prepared under—

• (a) section 399 of the Companies Act 2006, or

• (b) any corresponding provision of the law of a territory outside the United Kingdom.

• (4) The participation condition is met in relation to A and B (“the relevant parties”) on a day if, within the period of 6 months beginning or ending with that day—

• (a) one of the relevant parties directly or indirectly participates in the management, control or capital of the other, or

• (b) the same person or persons directly or indirectly participate in the management, control or capital of each of the relevant parties.

• (5) For the interpretation of subsection (4), see sections 157(1), 158(4), 159(1) and 160(1) (which have the effect that references in that subsection to direct or indirect participation are to be read in accordance with provisions of Chapter 2 of Part 4).

• (6) If one of the relevant parties is a securitisation company within the meaning of Chapter 4 of Part 13 of CTA 2010, the relevant parties are not to be regarded as related parties of each other as a result of subsection (4) merely by reference to the fact that—

• (a) the securitisation company is held by a trustee of a settlement, and

• (b) the other relevant party is a settlor in relation to that settlement.

• (7) The 25% investment condition is met in relation to A and B if—

• (a) one of them has a 25% investment in the other, or

• (b) a third person has a 25% investment in each of them.

• (8) Sections 464 and 465 apply for the purpose of determining whether a person has a “25% investment” in another person.

Meaning of “25% investment”

464

• (1) A person (“P”) has a 25% investment in another person (“C”) if—

• (a) P possesses or is entitled to acquire 25% or more of the voting power in C,

• (b) in the event of a disposal of the whole of the equity in C, P would receive 25% or more of the proceeds,

• (c) in the event that the income in respect of the equity in C were distributed among the equity holders in C, P would receive 25% or more of the amount so distributed, or

• (d) in the event of a winding-up of C or in any other circumstances, P would receive 25% or more of C's assets which would then be available for distribution among the equity holders in C in respect of the equity in C.

• (2) In this section references to the equity in C are to—

• (a) the shares in C other than restricted preference shares, or

• (b) loans to C other than normal commercial loans.

• (3) For this purpose “shares in C” includes—

• (a) stock, and

• (b) any other interests of members in C.

• (4) For the purposes of this section a person is an equity holder in C if the person possesses any of the equity in C.

• (5) For the purposes of this section—

• “normal commercial loan” means a loan which is a normal commercial loan for the purposes of section 158(1)(b) or 159(4)(b) of CTA 2010, and

• “restricted preference shares” means shares which are restricted preference shares for the purposes of section 160 of CTA 2010.

• (6) In applying for the purposes of this section the definitions of “normal commercial loan” and “restricted preference shares” in a case where—

• (a) C is not a company, or

• (b) C is a company which does not have share capital,

sections 160(2) to (7) and 161 to 164 of CTA 2010 (and any other relevant provisions of that Act) have effect with the necessary modifications.

• (7) In this section references to a person receiving any proceeds, amount or assets include—

• (a) the direct or indirect receipt of the proceeds, amount or assets, and

• (b) the direct or indirect application of the proceeds, amount or assets for the person's benefit,

and it does not matter whether the receipt or application is at the time of the disposal, distribution, winding-up or other circumstances or at a later time.

• (8) If—

• (a) there is a direct receipt or direct application of any proceeds, amount or assets by or for the benefit of a person (“A”), and

• (b) another person (“B”) directly or indirectly owns a percentage of the equity in A,

there is, for the purposes of subsection (7), an indirect receipt or indirect application of that percentage of the proceeds, amount or assets by or for the benefit of B.

• (9) For this purpose the percentage of the equity in A directly or indirectly owned by B is to be determined by applying the rules in sections 1155 to 1157 of CTA 2010 with such modifications (if any) as may be necessary.

• (10) Subsection (7) is not to result in a person being regarded as having a 25% investment in another person merely as a result of their being parties to a normal commercial loan.

• (11) Any reference in this section, in the case of a person who is a member of a partnership, to the proceeds, amount or assets of the person includes the person's share of the proceeds, amount or assets of the partnership (apportioning those things between the partners on a just and reasonable basis).

Attribution of rights and interests

465

• (1) In determining for the purposes of section 464 the investment that a person (“P”) has in another person, P is to be taken to have all of the rights and interests of—

• (a) any person connected with P,

• (b) any person who is a member of a partnership, or is connected with a person who is member of a partnership, of which P is a member, or

• (c) any person who is a member of a partnership, or is connected with a person who is a member of a partnership, of which a person connected with P is a member.

• (2) For the purposes of subsection (1)—

• (a) section 1122 of CTA 2010 (“connected” persons) applies but as if subsections (7) and (8) of that section were omitted, but

• (b) a person is not to be regarded as connected with another person merely as a result of their being parties to a loan that is a normal commercial loan for the purposes of section 464.

• (3) In determining for the purposes of section 464 the investment that a person (“P”) has in another person (“U”), P is to be taken to have all of the rights and interests of a third person (“T”) with whom P acts together in relation to U.

• (4) For this purpose P “acts together” with T in relation to U if (and only if)—

• (a) for the purpose of influencing the conduct of U's affairs—

• (i) P is able to secure that T acts in accordance with P's wishes (or vice versa), or

• (ii) T can reasonably be expected to act, or typically acts, in accordance with P's wishes (or vice versa),

• (b) P and T are party to an arrangement that it is reasonable to conclude is designed to affect the value of any equity in U possessed by T, or

• (c) the same person manages some or all of any equity in U possessed by P and T.

In paragraphs (b) and (c) references to equity in U are to be read in accordance with section 464.

• (5) But P does not “act together” with T in relation to U under subsection (4)(c) if—

• (a) the managing person does so as the operator of different collective investment schemes, and

• (b) the management of the schemes is not coordinated for the purpose of influencing the conduct of U's affairs.

• (6) For this purpose “collective investment scheme” and “operator” have the same meaning as in Part 17 of the Financial Services and Markets Act 2000 (see sections 235 and 237).

• (7) In determining for the purposes of section 464 the investment that a person (“P”) has in another person (“U”), P is to be taken to have all of the rights and interests of one or more third persons with whom P has entered into a qualifying arrangement in relation to U.

• (8) For this purpose P has entered into a qualifying arrangement with one or more third persons in relation to U if they are parties to an arrangement concerning U as a result of which, by reference to shares held, or to be held, by any one or more of them in U, they can reasonably be expected to act together—

• (a) so as to exert greater influence in relation to U than any one of them would be able to exert if acting alone, or

• (b) otherwise so as to be able to achieve an outcome in relation to U that, if attempted by any one of them acting alone, would be significantly more difficult to achieve.

• (9) For this purpose the reference to shares in U includes shares in U that may be held as a result of the exercise of any right or power and includes rights or interests in U that are of a similar character to shares.

• (10) In this section “arrangement” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

Certain loan relationships etc to be treated as made between related parties

466

• (1) This section—

• (a) makes provision for treating a person (“D”) who is not a related party of another person (“C”) as if they were related parties of each other but only in respect of particular liabilities or transactions, and

• (b) is expressed to apply in relation to loan relationships but also applies (with any necessary modifications) in relation to any other financial liability owed to, or any transaction with, C.

• (2) If at any time—

• (a) D is party to a loan relationship as debtor and C is party to the relationship as creditor, and

• (b) another person (“G”) who is a related party of D provides a guarantee, indemnity or other financial assistance in respect of the liability of D that represents the loan relationship,

D and C are treated for the purposes of this Part as if, in relation to the loan relationship concerned (and anything done under or for the purposes of it), they were related parties of each other at that time.

• (3) Subsection (2) is subject to—

• (a) section 415 (qualifying net group-interest expense), and

• (b) section 438(3) (infrastructure: interest payable to third parties etc).

• (4) If at any time—

• (a) D is party to a loan relationship as debtor and C is party to the relationship as creditor, and

• (b) another person (“G”) who is a related party of D indirectly stands in the position of a creditor as respects the debt in question by reference to a series of loan relationships or other arrangements,

D and C are treated for the purposes of this Part as if, in relation to the loan relationship concerned (and anything done under or for the purposes of it), they were related parties of each other at that time.