Corporation Tax Act 2009 section 447

Exchange gains and losses on debtor relationships: loans disregarded under Part 4 of TIOPA 2010

Section 447 deals with how exchange gains and losses on a company's borrowings are treated for corporation tax purposes when transfer pricing rules require all or part of the loan to be disregarded because it was not made on arm's length terms.

• Where transfer pricing rules require a loan representing a debtor relationship to be wholly disregarded, any exchange gain or loss on that loan is excluded entirely from the loan relationship tax computations.
• Where only part of the loan is disregarded under transfer pricing, the exchange gain or loss is excluded in the same proportion as the disregarded part bears to the whole loan.
• Where the debtor relationship is matched (for example, by a corresponding asset in the same currency), only the lesser of the amount otherwise excluded and the unmatched portion of the exchange gain or loss is left out of account.
• The transfer pricing rules do not require exchange gains or losses on loan relationships to be recalculated as if the arm's length provision had been made instead of the actual provision — the only adjustment is the exclusion described above.