Corporation Tax Act 2009 section 338

Meaning of company replacing another as party to loan relationship

Section 338 defines what it means for one company to replace another as a party to a loan relationship, covering both creditor and debtor positions within a corporate group context.

• Company A is treated as replacing Company B in a loan relationship if A enters into a relationship with equivalent rights or obligations to those B held before ceasing to be a party
• For creditor relationships, equivalence means the same rights against the same persons regarding capital, interest and dividends, with the same enforcement remedies
• For debtor relationships, equivalence means the same obligations to the same persons regarding capital, interest and dividends, with the same enforcement remedies
• Differences in total nominal amounts of the assets, the form in which they are held, or the way they can be transferred are all disregarded when assessing equivalence