Corporation Tax Act 2009 section 451

Exception to section 449 where loan exceeds arm's length amount

Section 451 deals with the situation where a loan between connected parties exceeds what would have been agreed at arm's length, but is not entirely uncommercial, and limits the exchange gains or losses that can be recognised for tax purposes to the arm's length proportion.

• Where an arm's length loan would have been more than nil but less than the actual loan amount, section 449 (which would exclude all exchange gains and losses) does not apply
• Instead, if there is no corresponding debtor relationship, only a proportion of the exchange gain or loss is brought into account — the proportion that the arm's length amount bears to the actual loan amount
• Where the creditor relationship is to any extent matched, the amount excluded is limited to the lesser of the proportional restriction and the exchange gain or loss attributable to the unmatched part of the creditor relationship
• The relevant transaction is the transaction that gave rise to the loan creating the creditor relationship in the accounting period in question