Corporation Tax Act 2009 section 352

Disregard of related transactions

Section 352 ensures that where a company holds a creditor loan relationship with a connected company, any related transaction cannot be used to inflate tax deductions or reduce taxable credits beyond what would have arisen had the transaction never occurred.

• Where a connected companies creditor relationship is subject to a related transaction, the tax credits for the period must not fall below, and the tax debits must not exceed, the amounts that would have applied had the transaction not taken place and no further amounts had accrued after it.
• Changes in the fair value of the debt asset that result from movements in the corresponding market interest rate are not restricted by these rules, although separate rules on impaired or released connected company debts may still apply.
• The corresponding market rate is defined as the lowest arm's length borrowing rate available to a company of good financial standing, in the same currency and on comparable repayment and other terms as the debt in question.
• Exchange gains or losses arising from the debt are unaffected by these restrictions and continue to be brought into account in the normal way.