Corporation Tax Act 2009 section 327

Disallowance of imported losses etc

Section 327 prevents companies from claiming tax relief for losses on loan relationships that arose during a period when the relationship was outside the scope of UK corporation tax.

• Where a loan relationship loss is wholly or partly referable to a time when the relationship was not subject to UK taxation, the portion of the loss attributable to that non-UK period is disallowed for corporation tax purposes.
• A relationship is considered not subject to UK taxation at any time when the company (or a predecessor party to the relationship) would not have been chargeable to UK corporation tax on any profits arising from it.
• The disallowed amount cannot be brought into account under any other part of the corporation tax rules either — the loss is effectively eliminated entirely, not merely redirected to another tax computation.
• This disallowance does not apply where the company uses fair value accounting for the loan relationship in question.